January 18, 2005 4:59 PM PST
Yahoo beats the Street
The Internet bellwether reported $373 million in profits, or 25 cents per share, for the three months ending Dec. 31. The figure includes $185 million, or 13 cents a share, from the sale of Google stock. Without the sale, earnings for the quarter came in at $187 million, or 13 cents a share. That's higher than Wall Street's 11-cents-per-share expectation, according to Thomson First Call's consensus of analyst estimates. It's up from 5 cents a share on $75 million in profits from the previous year.
Wall Street analysts were upbeat about Yahoo's earnings, which they viewed as strong and free of surprises. Online advertising remains on a growth path, and there are no indications of a slowdown, analysts said.
"I think it confirms that everything is very strong," said Safa Rashtchy, an equity analyst at Piper Jaffray.
Revenue excluding traffic acquisition costs, or "TAC," related to its commercial search business, reached $785 million for the quarter and $2.6 billion for the year. In comparison, Yahoo reported $511.3 million for the fourth quarter 2003, and $1.47 billion for the year.
Yahoo focuses on its revenue numbers without TAC, calling the figure a more accurate reflection of its search business. TAC is the amount of money its Overture Services division pays its high-profile distributors, such as Microsoft's MSN, to host its commercial search results. Businesses that advertise on Overture pay the company every time someone clicks on their links, but a portion of these revenues are then paid to distributors such as MSN.
Including TAC, fourth-quarter 2004 revenue hit $1.08 billion and its year-end total grew to $3.58 billion.
While online advertising continued to fuel Yahoo's revenue growth, subscription services maintained a healthy pace as well. Here's a breakdown of Yahoo's three revenue segments. All numbers reported include TAC:
Marketing services: Online advertising from commercial search and branded advertising hit $911 million, up 67 percent from the same period in 2003. For the year, revenue reached $3 billion, more than doubling from 2003. Executives said commercial search and branded advertising are continuing to increase at a healthy pace. Executives declined to break out revenue or growth numbers for branded versus search advertising.
Fees: Yahoo's for-pay businesses ended the year with 8.4 million subscribers, many of whom are SBC DSL users, up from 4.9 million last year. The unit reported $129 million for the quarter, up 52 percent from last year, and $426 million for the year, up 43 percent. Much of this quarter's growth stemmed from migrating customers from its MusicMatch acquisition, new subscribers from Canada's Rogers Cable, and the seasonal benefits of Yahoo's fantasy football service. The company expects growth to slow in the coming year with a target of 11 million to 11.5 million subscribers.
Listings: The unit primarily consisting of its HotJobs site, the listings business this quarter reported $38 million in revenue, up 15 percent from last year. For the year, revenue came in at $147 million, up 16 percent from 2003. From now on, Yahoo will report listings as part of marketing services.