Tuesday July 6, 9:41 pm Eastern Time
Yahoo seen kicking off strong quarter for Net stocks
By Duncan Martell
PALO ALTO, Calif., July 6 (Reuters) - Yahoo! Inc.(Nasdaq:YHOO - news) kicks off the
earnings season for Internet companies on Wednesday when the largest search engine
reports second quarter results, which analysts believe may be stronger than expected.
After Yahoo, investors will be looking for earnings reports from other Internet heavy hitters
such as book-and-music-seller Amazon.com Inc. (Nasdaq:AMZN - news), auction site
Ebay Inc. (Nasdaq:EBAY - news), America Online Inc. (NYSE:AOL - news), portal
ExciteATHome. (Nasdaq:ATHM - news) and Internet advertising company DoubleClick Inc. (Nasdaq:DCLK - news)
Because Yahoo is first out of the gate and since it is the largest Internet search service, investors and analysts see it as a
bellwether for the fledgling Internet industry.
''The interesting thing to watch will be if Yahoo reports a strong quarter, will that be a catalyst for the rest of the Internet stocks
to move up,'' said Andrea Williams, an analyst at E*Offering. ''Yahoo is the industry matron.''
According to First Call Corp., which tracks analyst forecasts, Santa Clara, Calif.-based Yahoo is expected to earn 8 cents a
share.
In the year-ago period, Yahoo said it had pro forma income of $6.73 million, or 3 cents a share, after accounting for two
2-for-1 stock splits in the past 12 months. Those figures don't include a charge of $15 million for its acquisition of Viaweb Inc.
and other items. Including charges, Yahoo lost $8.97 million, or 5 cents a share, a year ago.
''We believe Yahoo will have another strong quarter,'' wrote Merrill Lynch & Co. Internet analyst Henry Blodget in a note to
clients last week.
He recommended that investors focus on revenue, earnings per share, pageviews and operating margin. Blodget noted that he
expects $103 million in revenue for the quarter.
In addition, Blodget is calling for 305 million average daily page views, up 30 percent from the first quarter. That includes
pageviews for Geocities, which Yahoo is in the process of acquiring.
Operating margin should come in at 26 percent, a touch lower than last quarter because of higher product development and
general and administrative costs associated with Geocities acquisition, Blodget wrote.
''Yahoo has always beaten consensus, and we would not be surprised to see it do so again,'' he wrote.
Typically, Yahoo stock rises ahead of the earnings release and then declines after the company reports results. Yahoo stock,
which has been up strongly in recent days, closed down $3 to $175.125 on Nasdaq.
With more and more companies rushing online and the number of consumers hopping online increasing at a feverish pace, the
largest and best-known Internet companies with strong brand names and business models will fare the best, analysts said.
''The growth of the Internet has been phenomenal in the first half of the year, and I think we are going to be pleasantly
surprised by earnings by some of the bigger names,'' said analyst Steve Harmon of Internet.com.
''We've seen (increased) corporate use of the Internet, which translates into more revenues and earnings for companies like
Yahoo and AOL, in their advertising,'' Harmon said.
Among other Internet companies slated to report earnings in upcoming weeks, Wall Street analysts expect ExciteAtHome to
post a second-quarter loss of 3 cents a share versus a loss of 5 cents a year earlier, according to First Call.
EBay is expected to report a second quarter profit of 3 cents a share, up from a profit of 2 cents a year ago, and America
Online is expected to report a fiscal fourth quarter profit of 11 cents versus a year-ago profit of 6 cents, according to First Call.
Amazon.com, which earlier this year warned of deepening losses over coming quarters due to acquisitions and planned
investments, is expected to post a second quarter loss of 51 cents a share versus a year-ago loss of 12 cents a share, according
to First Call.
Wall Street analysts see DoubleClick reporting a second quarter loss of 13 cents a share versus a year-ago loss of 14 cents,
according to First Call.
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