To: Glenn D. Rudolph who wrote (21239 ) 4/8/1999 9:38:00 AM From: Peter Bernhardt Read Replies (1) | Respond to
Glenn,YAHOO (YHOO) 208 7/16 -6 7/16. Even Yahoo is not providing clear operating numbers. Briefing.com is very disappointed. After the close Wednesday, Yahoo (YHOO) reported pro-forma first quarter profits of $0.11 a share. That compares with the expected $0.08 per share profit. Or perhaps not. The pro-forma game that Internet companies have become so fond of excludes amortization costs for acquisitions. That is, a company goes out and pays a big price for a company, then takes a one-time charge for acquired in-process research and development, and then excludes amortization costs in the pro-forma numbers. Very often, the charges for acquired research and development can legitimately be excluded. Of course, the SEC just told Network Associates that they were too aggressive in considering such costs as one-time, and told them to start charging them to operating earnings over a period of time (see the 8:55 4/7 Story Stock below). Although we are not suggesting that YHOO has done anything wrong, we believe the SEC should take a long look at the accounting practices of many of these Internet companies. One definite argument we do have with YHOO's numbers is the exclusion of certain amortization costs from the highlighted number of $0.11 per share. Think about it. Amortization costs are by definition not one time charges. And, they definitely count as an expense under GAAP. Nowhere in the press release does YHOO provide operating earnings, which is what Wall Street is supposed to focus on. To get true operating earnings, the amortization costs should probably be added back in, even if the one-time charges are excluded as legitimate. Doing so would only change YHOO's number to $0.10 per share. Not a big difference, but perhaps significant. And, there is absolutely no reason why a company of YHOO's stature can't simply put out a press release on their earnings with a clear statement as to what GAAP operating earnings are. The market is not likely to take much heed of all this. Instead, analysts will say that the $0.11 per share is comparable to their $0.08 per share forecasts. So, YHOO beat by three cents. Of course, YHOO stock ran up in the weeks ahead of the earnings report, and they were widely expected to beat the estimates. After all, they beat by an average of five cents the past four quarters, why not again? Revenue growth of 181% this quarter continues the slight drift lower from 187% year-over-year growth the prior quarter, and 196% the quarter before that. All in all, these numbers are not too much different than the market expected, and YHOO bounced back by a couple of points in after hours trading. Where to from here? Briefing.com will have a full Stock Brief on Yahoo tomorrow morning.
