Overture Says 4th-Quarter Earnings Beat Expectations
Despite a continuing downturn for Internet-related companies, Overture Services Inc. announced better-than-expected fourth-quarter earnings Tuesday, with 2001 revenue more than double that of the previous year.
The company also announced that it has expanded its contract to provide Microsoft Corp.’s MSN with online search results for another year. On that news, the company’s stock soared $5.91, or 27%, to close at $27.66 in Nasdaq trading.
Overture, formerly known as GoTo.com, reported after the market closed that it earned $20.8 million, or 35 cents a share, on revenue of $101.2 million in the fourth quarter. The company, which offers pay-for-placement Internet searches, had posted a net loss of $361.7 million, or $7.27 a share, on revenue of $39.8 million the same quarter in 2000.
For fiscal 2001, Overture reported net income of $20.2 million on revenue of $288.1 million. It posted a net loss of $458.6 million on revenue of $103.1 million the previous year.
The company had projected fourth-quarter net income of $10million on revenue of $76million. It was its second straight quarter of profitability.
“We’re performing ahead of our own expectations,” said Overture Chief Executive Ted Meisel.
Overture provides search results for America Online, Yahoo, Netscape and other Internet sites.
Advertisers bid for placement in Overture’s search results, with the highest bidder appearing at the top. When a consumer clicks on the links, the advertiser pays Overture a fee.
Overture generated 442 million paid clicks worldwide for 53,000 active advertisers during the fourth quarter. It generated 228 million paid clicks for 38,000 advertisers the same quarter a year before.
Advertisers paid an average of 23 cents per click at the end of 2001, an increase of 6 cents from the previous year.
Analysts say that number could at least double as big names such as Lego Co. begin to advertise.
“They’re adding advertisers at a fairly high rate and they’re adding bigger advertisers,” said Safa Rashtchy, a senior analyst with U.S. Bancorp Piper Jaffray.
Overture’s new contract will keep revenue flowing to the company from Microsoft’s MSN Web site through 2003.
Last week, shares fell 41% when EarthLink Inc. announced it would not renew Overture’s contract and launched a new search engine powered by technology from Google Inc.
Though the company’s contracts with America Online Inc. and Yahoo Inc. come up for renewal later this year, Overture’s new agreement with Microsoft strengthens its position, analysts said.
“This totally locks up the market for them,” Rashtchy said. “It almost doesn’t matter if you have competition.”
The company projected first-quarter net income of $21 million on revenue of $122 million and fiscal 2002 net income of $58 million on revenue of $442 million.
* Applied Materials Inc. lost $45million in the fiscal first quarter but beat expectations as the San Jose chip-making equipment giant continued to struggle with weak demand.
For the three months ended Jan. 27, Applied lost $45 million, or 6 cents a share, compared with a profit of $157 million, or 19 cents, in the year-ago period.
Excluding special items, the company earned $15 million, or 2 cents a share, compared with a profit of $424 million, or 50 cents, a year ago. Analysts were expecting the company to break even. First-quarter revenue fell 58% to $1 billion.
* Infogrames Inc., a video game publisher in Santa Monica, posted a 30% rise in sales but a 26% drop in profit for its fiscal second quarter because of higher royalty payments and a charge related to the bankruptcy of Kmart Corp. Net income fell to $12.2 million, or 17 cents a share, from $16.2 million, or 24 cents a share, a year earlier. Revenue rose to $165.8 million, from $127.5 million a year earlier. Infogrames, the U.S. subsidiary of France-based parent, Infogrames SA, wrote off $4.2 million owed by Kmart, about two-thirds of what it is owed by the troubled retailer.
* Stamps.com, the Santa Monica online postage service, said its fourth-quarter loss narrowed dramatically as it reported its first operating profit on continuing operations. The company lost $987,000, or 2 cents a share, from a deficit of $68.4million, or $1.4 a share, a year earlier. Earnings before interest, taxes, depreciation and amortization from continuing operations totaled $300,000, compared with a $2.4-million loss a year earlier. Sales fell 15% to $4.5million.
