wsj article 525 million cash, broadcast and geocities not expected to be neutral to positive to earning within 9 months, ... - very bullish
Yahoo! Reports Strong Increase
In Earnings for the First Quarter
By KARA SWISHER
Staff Reporter of THE WALL STREET JOURNAL
Yahoo! Inc. blew past Wall Street's expectations, posting strong increases in earnings, revenue and traffic on its Web site for the first quarter.
The Santa Clara, Calif., Internet portal reported net income of $16.4 million, or seven cents a share, including one-time charges, compared with $3.3 million, or two cents a share, for the year-earlier period. Excluding $12.4 million in acquisition and tax charges, the company said it earned $25.1 million, or 11 cents a diluted share. Revenue nearly tripled to $86.1 million compared with $30.6 million.
A consensus of Wall Street analysts compiled by First Call had expected Yahoo to earn eight cents a share, with revenue projections for the quarter of $77 million to $82 million.
Yahoo, whose network of online properties makes it the second most visited collection of sites on the Web after America Online Inc., also saw solid increases in its audience. According to Yahoo, its reach continued to grow, to an average of 235 million page views a day in March from 167 million in December 1998. (Page views are defined as one electronic page of information displayed in response to a user request.) Registered members, who give Yahoo detailed information about themselves in order to use services like e-mail, increased to 47 million from 35 million.
Yahoo announced its earnings after the stock market closed. But in after-hours trading its shares rose to $212.25, up from $208.4375 at the close of Nasdaq Stock Market trading, according to Instinet Inc. Wednesday, Yahoo shares had fallen $6.4375 to its closing mark, after having surged more than $40 earlier in the week on optimistic investor expectations.
Tim Koogle, Yahoo's chief executive officer, attributed the improved results to the growing momentum of the company's brand, which is now reaching more mainstream users.
"At some point, you reach critical mass and it becomes self-reinforcing," said Mr. Koogle, who pointed to increased use of Yahoo's personalization features as important to traffic growth. "Our name and services are becoming more familiar to new users every day."
Company Profile: Yahoo!
Mr. Koogle said he expects further growth due to a series of recent distribution deals as well as Yahoo's pending acquisitions of two major Web companies, community site GeoCities Inc. and broadcast.com Inc., an Internet broadcaster of audio and video. Yahoo has spent more than $10 billion in stock to buy these properties, in order to extend its reach and range of features. The purchases are the first major ones for Yahoo and reflect an overall industry trend toward consolidation.
Some analysts had worried about the financial effect of the deals, because, like most Internet companies, neither GeoCities nor broadcast.com is profitable, although Yahoo is. Mr. Koogle said he expects both acquisitions to have a neutral or positive effect on earnings within a range of nine months to a year. He said the GeoCities deal is expected be completed by the end of May or early June and the broadcast.com deal to be wrapped up in the third quarter. Details of both acquisitions will be forthcoming, he said. Mr. Koogle added that he expects integration to go smoothly and that broadcast.com will be operated as a separate division, although its features will be integrated into Yahoo's many sites.
He also said Yahoo will continue to look for more acquisition opportunities, but will buy only if it makes strategic sense. "We are serious about using our scale and stock currency to selectively make wise acquisitions," he said.
Yahoo can certainly afford more acquisitions. Along with high-flying stock that has given the company a market value of more than $40 billion, the company also reported that it has $525 million in cash.
"It's another impressive quarter showing increased revenues and profits and expenses less than expected," said Lise Buyer, an analyst with Credit Suisse First Boston. "It's all the signs of superior management."
In related news, GeoCities announced increased revenue and traffic for the first quarter, although losses continued to widen. In the three months, the Marina del Rey, Calif., company more than tripled its revenue to $7.8 million from $2.2 million in the year-earlier period. Daily page views rose to 61 million in March compared with 53 million in December, while the number of home pages created by members grew 24% to more than four million.
But losses also grew to $10 million, or 31 cents a share, compared with $3.6 million, or $1.29 a share. Excluding charges, GeoCities lost $6.9 million, or 21 cents a share, compared with a net loss of $2.9 million, or 12 cents a share a year ago.
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