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Technology Stocks : Altaba Inc. (formerly Yahoo) -- Ignore unavailable to you. Want to Upgrade?

To: Vendit™ who wrote (21343)	4/11/1999 10:01:00 AM
From: Glenn D. Rudolph	Respond to of 27307

April 9, 1999 Tech Week Yahoo! Offers Brace of Reasons Why It's an Internet Blue-Chip By JASON FRY and TIMOTHY HANRAHAN THE WALL STREET JOURNAL INTERACTIVE EDITION QUICK QUIZ: Is any Internet stock worth $200 a share? Does a company with revenues of around $200 million in 1998 deserve a market cap of $41 billion? If you said "yes," count yourself as a card-carrying Internet bull. If you said "no," or some unprintable variation of it, count yourself as an Internet bear. You may, of course, prefer the term "realist," and have plenty to say about a sector in which many companies are doing just fine despite having no earnings, no track record of wise management and strategic plans written in water. Fair enough: This is, after all, a philosophical argument in which there isn't much that could be said to sway either camp. But there is one Internet stock that even hardcore Net doubters ought to admit is worthy of a premium: Yahoo! Inc. Yahoo's latest earnings report, which came out late Wednesday, offered a portrait in miniature of the Santa Clara, Calif., company's strengths: stronger-than-expected results, growth with profits, and clear-eyed strategy. The search-engine-turned-portal-site spoiled investors once again, reporting pro forma net income of $25.1 million, or 11 cents a diluted share, on revenue of $86.1 million. That beat analysts' consensus estimate of eight cents a share and their revenue predictions, and perhaps even more importantly, topped the "whisper" numbers making the rounds on Wall Street. But analysts should be used to such surprises: Yahoo consistently beats their earnings estimates. Yahoo's traffic numbers left no doubt that growth remains strong. The company said its traffic rose a gaudy 41% to 235 million average page views a day in March from 167 million in December, while the number of registered users jumped to 47 million from 35 million. In fact, Yahoo said, its 5.4% audience growth rate in February was the best among the top 10 Web sites and twice the growth rate of the Web overall. Those traffic numbers painted a picture of a Web property that's aggressively growing. That doesn't make Yahoo any different from a flock of other Web contenders. But even as it's grown, the company has also turned profits -- small ones, perhaps, but real ones nonetheless. That's a rarity among Internet stocks: Look at the charts for portal-site rivals Excite Inc., Infoseek Corp. and Lycos Inc. and try to find a profit anywhere. Amazon.com Inc. impresario Jeff Bezos has even called his company's brief profitable period in December 1995 a mistake. In the Internet realm, growth is the goal and a lack of profits is the price of that goal -- yet somehow Yahoo keeps growing without sacrificing the bottom line. The company also keeps thinking ahead. Though considered a fairly conservative firm at least by Internet standards, Yahoo has been on an acquisition binge of late, parting with around $10 billion of its stock to add home-page site GeoCities and streaming-media supplier broadcast.com Inc. Understandably, that made investors wary: After all, those two companies fit the revenues-without-profits Internet model perfectly. But Yahoo used its earnings release to offer investors reassurance on that score, saying the two acquisitions would be neutral to positive earnings-wise this year. Adding broadcast.com should offer Yahoo short-term and long-term advantages. Short-term, it diversifies Yahoo's revenue stream, adding broadcast.com's corporate-contracts money to Yahoo's ad dollars; Yahoo knows perfectly well that there are still plenty of doubts about Internet advertising's effectiveness. Long-term, the deal could be another instance in which Yahoo beat its competitors to the punch. As the search engines have evolved into portal sites, Yahoo has generally been first in adding new features, whether those features were news, free e-mail or Internet access. (And when it hasn't been first -- it wasn't first to acquire a home-page site -- it's been aggressive: When Yahoo acquired Geocities, it was the third-most-visited site, behind AOL's and that of Yahoo itself.) Now, Yahoo is betting that the next must-have for portals will be ample streaming audio and video, particularly for surfers coming in via high-speed connections. The company could be wrong, but it has a strong track record of being right. If Yahoo is right, by acquiring broadcast.com it's just made the next move its rivals will have to struggle to match.