January 17, 2002 2:50 PM PST
Yahoo gains after earnings, exec's resignation
Shares of Yahoo surged nearly 13 percent in heavy trading Thursday. The stock closed up $2.25 at $20.12 on the Nasdaq Stock Market. Wall Street analyst reports on Thursday were upbeat about the company's performance and execution.
On Wednesday, the company posted a net loss of 2 cents a share for the fourth quarter. It saw revenue plunge 39 percent to $188.9 million from $310.9 million in the same period last year. Still, Wall Street expected the company to report revenue of $170 million, according to research firm First Call.
For the year, Yahoo reported revenue of $717.4 million, down from $1.1 billion for 2000. First Call's consensus estimate expected 2001 revenue to reach just $699 million.
Looking forward, the company said it expects revenue between $160 million and $180 million for the first quarter of 2002, and between $750 million and $800 million for the full year.
Good news for Yahoo could have a ripple effect beyond the company, which investors regard as a gauge of the health of the Internet media business in general. Investors have been watching for signs of a bottom for the beleaguered sector after three straight dips in quarterly sales last year. U.S. Internet ad sales fell 8.4 percent to $5.5 billion in the first nine months of 2001, according to a December report from industry trade group the Interactive Advertising Bureau.
"While 2001 was a year of challenges and transition, Yahoo adapted and executed to end the year on a high note, with fourth-quarter revenues and income exceeding the business outlook we previously provided," Chief Executive Terry Semel said in a statement. "As we reorganized the business and reduced costs throughout the year, Yahoo managed through the difficult environment."
Mallett was at the center of Yahoo's fabled ascension from a Stanford trailer park to a fearless leader of the new media revolution. His management style reflected the evolution of the company: fast, hard-charging, competent and in possession of a seemingly impenetrable knowledge of the changing world of the Net.
A former member of the Canadian national soccer team, Mallett landed at Yahoo after a short career as an entrepreneur and a stint at software maker Novell. Recruited in 1995 as Yahoo's 12th employee, he quickly became a dot-com star and a millionaire many times over.
But when the Internet economy began to stagger, so did Mallett's run in the company. After Yahoo's board of directors ousted CEO Tim Koogle in March 2001 and began searching outside the company for a replacement, the writing was on the wall. Since Semel started in May, the biggest question in the minds of many Yahoo executives and insiders was not whether Mallett would resign, but when.
Colleagues praised Mallet for his continuing contributions to the company through the course of Yahoo's changes this year.
"In the history of world, look to see how many brands were created in five years that have (such) enduring strength as Yahoo," Yahoo Chief Financial Officer Susan Decker said in an interview.
Mallett will remain in his position through April and will be a member of the board of directors until the company's stockholder meeting this spring. Yahoo said it expects to outline a succession plan before he leaves.
Road to recovery
The slump that forced Yahoo to initiate house cleaning in its executive suites also required it to re-examine its fundamental business. Analysts said Wednesday's earnings report offered some signs of a rebound for the company.
For the quarter, the company reported a net loss of $8.7 million, or 2 cents per share, compared with a net loss of $97.8 million, or 17 cents per share, in the year-ago quarter. The Web portal said its net loss for the year came in at $92.8 million, or 16 cents per share, compared with net income of $70.8 million, or 2 cents per share, in 2000.
Excluding all charges and investment gains or losses, Yahoo finished the quarter with a pro forma net income of $16.7 million, or 3 cents a share. For the year, pro forma net income reached $41.4 million, or 7 cents a share. Wall Street expected a pro forma income of a penny a share for the quarter and 5 cents a share for the year, according to First Call.
Yahoo on Wednesday highlighted results indicating progress in its efforts to diversify revenue to include non-advertising businesses. The company said 25 percent of its total revenue in 2001 came from non-marketing sources, compared with 13 percent in the previous year.
For the fourth quarter, Yahoo said non-marketing revenue made up 28 percent of sales. At least some of those gains appear to be the result of a change in the way the company categorizes its revenue sources. For the first time, Yahoo separated e-commerce transactions, totaling $13 million for the quarter, from its advertising revenue. Without the change, non-advertising revenue would have increased by just 1 percent.
Yahoo also said it would take a charge between $50 million and $100 million because of new accounting rules affecting the treatment of goodwill. Last week, AOL Time Warner said it would be forced to write off between $40 billion and $60 billion as a result of the accounting change.
"The company appears to be returning to financial growth, and that's important for investor confidence," said Jordan Rohan, an equity analyst at SoundView Technology Group. "It's been a long time, but it's clear the trough is in the rearview mirror."