July 19, 2005 2:40 PM PDT

Yahoo profit rises, but revenue falls short

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Internet bellwether Yahoo on Tuesday posted a higher second-quarter profit on continued strong advertising, but revenue fell short of analysts' expectations, sending shares lower in after-hours trading.

For the period ended June 30, the company posted a net income of $754.7 million, or 51 cents a share, excluding traffic acquisition costs. Minus $563 million from the sale of an investment that Yahoo executives declined to specify, the company reported 13 cents a share, in line with analyst estimates and 5 cents above last year.

Sunnyvale, Calif.-based Yahoo posted revenue of $1.25 billion, a 51 percent increase over the $832.3 million it reported a year ago. Excluding fees paid to marketing partners, the company posted revenue of $875.1 million. Analysts had expected the company to post revenue of $882.7 million, according to a survey by Thomson Financial.

The company forecasted second-quarter revenue of $855 million to $859 million when it posted its first-quarter results in April.

Yahoo shares closed up 3 percent at $37.73 before the announcement. But shares were down 10 percent in after-hours trading to $33.94 per share.

Looking forward, Yahoo forecasted revenue, excluding traffic acquisition costs, of $880 million to $930 million for the third quarter and of $3.6 billion to $3.7 billion for the year end.

The third quarter tends to be slower for marketing, but typically rebounds in the fourth quarter, executives said on a conference call.

Yahoo plans to improve its search advertising technologies, offer new contextual-targeted opportunities, expand overseas and make acquisitions as needed, said Chief Executive Terry Semel.

Yahoo specializes in search advertising and brand advertising, including partnerships with major companies, movie studios and other advertisers that buy big banner ads. Yahoo's main rival, Google, relies on search advertising.

Yahoo gets the majority of its revenue from advertising, which includes brand ads, paid search and rich media.

"The market will see this somewhat as a miss," said David Edwards, an analyst at American Technology Research. Revenue was lower than estimates and guidance "moved only slightly up if you look at the midpoint, still below the consensus," he said.

Edwards said Yahoo's growth in subscribers in its fee-based services business, including its partnership with SBC Communications and its enhanced Web services offerings, is a good indicator of the company's diversification capabilities.

Yahoo was ranked as the No. 1 brand online during June, attracting 99.1 million U.S. unique visitors, according to Nielsen/NetRatings. Nine Yahoo services and Web sites, including Mail, News, Local, Finance, Photos and the portal, were ranked No. 1 in their categories, the report said.

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I'll never understand...
...Analyst and stock market people. The company beat it's own revenue forecast, met profit forecast which was an increase from last quarter, yet your stock went down because they didn't meet the analyst revenue forcecast? Isn't meeting the profit projection at a lower revenue a good thing? Meaning the break even point is lower than analyst expect? Anyway...
Posted by nmcphers (261 comments )
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