Yahoo Tops Forecast; Analysts Yawn

Online bellwether Yahoo Inc. beat Wall Street’s expectations for its quarterly earnings Wednesday. But analysts said the modest upside doesn’t foreshadow a recovery for the beleaguered Internet sector.

Yahoo’s pro forma profit of $17 million, or 3 cents per share, topped the consensus of 1 cent from analysts polled by First Call/Thomson Financial.

Yahoo’s revenue still slid 39% compared to a year earlier, coming in at $189 million. But the figure exceeded the company’s earlier guidance of $160 million to $180 million.

“We definitely see the year 2002 as a growth year for Yahoo,” Terry Semel, chief executive, said in an interview. “We’re making an assumption that the advertising market will continue to stay flat,” but that Yahoo will grab a larger share going forward.

Analysts generally agreed that the company has navigated through the worst of a disastrous period, but see improvements coming slowly.

“Yahoo’s keeping its head above water in a very difficult market,” said Fred Moran of Jeffries & Co. “But when you factor in their guidance, we can’t expect a recovery and growth any time soon.”

In the same period a year earlier, Yahoo earned $80 million, or 13 cents per share pro forma, on revenue of $311 million. Counting one-time factors, Yahoo lost $9 million, or 2 cents per share, the last quarter, compared with a loss of $98 million, or 17 cents per share, a year before.

The company also announced the widely expected departure of President Jeff Mallett, who had been passed over for the top job when Hollywood veteran Semel was brought in last spring.

During the last year Yahoo has tried to wean itself from dependence on the lagging ad market. In November it announced a partnership with SBC Communications Inc. to offer high-speed Internet access services. Also in November, Yahoo added paid listings for its search-engine results.

In December, the company agreed to acquire HotJobs, a leading fee-based, job-listing Web site.

Investors have rewarded the approach. The company’s stock has more than doubled since September.

Yahoo shares fell $1.60, or more than 8%, to $17.87 in regular Nasdaq trading Wednesday; the stock climbed 14 cents to $18.01 in after-hours trading following the earnings announcement.

Ads and marketing services still account for 72% of the company’s revenue--one reason that some analysts view the firm as overvalued compared with other Internet and media companies.

But analysts applauded Yahoo for apparently having stabilized revenue after more than a year of contraction.

They said the company may even return to modest growth in 2002 as its new strategies begin to bear fruit.

“Strategically, the company is positioned better today than it had been at any point in 2001,” said John Corcoran, an analyst with CIBC World Markets.

But he cautioned that progress will be incremental until the ad market picks up, perhaps late this year.