The Web is being divided by the market capitalization haves and have-nots. Yahoo! Inc. (Nasdaq: YHOO) falls into the "have" category. As the portal easily topped every metric that Wall Street set for the company, other dot-coms such as Salon.com (Nasdaq: SALN) and Beyond.com (Nasdaq: BYND) are becoming information superhighway roadkill.
Yahoo has become so strong that seasonality has almost become an afterthought.
Yahoo: Buy on the dips?
The conventional wisdom is that the first quarter is slower for most media businesses, but Yahoo had no problems. In its first quarter, Yahoo added more advertisers and extended contracts, while enabling more commerce than it did in the fourth quarter.
Yahoo's strong growth will turn up the heat on competitors such as America Online (NYSE: AOL), Excite@Home (Nasdaq: ATHM), Lycos (Nasdaq: LCOS), Microsoft's MSN (Nasdaq: MSFT), NBCI (Nasdaq: NBCI) and Disney's Go Network (NYSE: DIS, GO).
Investors will probably ding Yahoo shares today because the company missed the dreaded "whisper number" with earnings of 10 cents a share. But don't let the sell-off fool you -- Yahoo delivered a great, if uneventful, quarter.
Here are the vital stats: Revenue was $228.4 million, about $8.4 million higher than Wall Street's most optimistic sales estimate. International revenue accounted for 14 percent of sales, which more than doubled compared with a year ago. Merrill Lynch analyst Henry Blodget said if Yahoo reported revenue of $220 million it would be his "dream case." Start dreaming Henry.
Page views were 625 million per day in March. Blodget expected 505 million page views. In March, Yahoo recorded 145 million unique users, including Yahoo! Japan, and 125 million registered users, up sharply from the fourth quarter. The company also enabled more than $1 billion in transactions on its network. Yahoo enabled about $670 million transactions in the fourth quarter.
As for the outlook, Yahoo wasn't that generous with the guidance. Expect the June quarter to be seasonally slower (no news there), but operating margins will increase. Outgoing financial chief Gary Valenzuela said analysts should bump up estimates for operating margins. Valenzuela, who will retire at the ripe old age of 43, upped operating margin estimates by 2 percent, so now look for 32 percent to 38 percent long term. In the first quarter, Yahoo had operating margins of 38 percent.
Strong get stronger
Armed with $1.1 billion of cash in the bank and no debt, CEO Tim Koogle said the company would be expanding its broadband and wireless services. Officials said wireless access will play a big role in growing the Yahoo brand abroad.
Yahoo Chief Operating Officer Jeff Mallett said he expects many international Yahoo users to get information via wireless devices. The payoff for wireless is three to five years from now, said officials.
Yahoo recently announced partnerships with Palm Inc. (Nasdaq: PALM), Motorola (NYSE: MOT) and Sprint PCS (NYSE: PCS). The portal also has alliances with numerous international wireless providers.
As for acquisitions, Koogle said Yahoo will go shopping, but only when it boosts the portal's market share or financial results. Koogle said the company's acquisition strategy would focus on media and communications services and commerce. He didn't name names or comment on the eBay (Nasdaq: EBAY) acquisition rumors.
Weak get weaker
And now for those have-nots.
Add Salon.com and Beyond.com to the critical list that includes Peapod.com (Nasdaq: PPOD), Drkoop.com (Nasdaq: KOOP) and CDNow (Nasdaq: CDNW).
Salon.com, which recently boosted shares by riding shotgun with the Linux movement, said it will miss estimates in its fourth quarter and revenue will fall sequentially. A larger than expected loss with no revenue growth is catastrophic for a company trading just above $4 a share.
Salon said it expects to report fiscal fourth quarter revenue ranging between $2.5 million and $2.9 million, down from $3 million in the third quarter. Salon.com sees a fourth quarter pro forma loss ranging between 35 cents and 42 cents per share, compared with a per-share loss of 49 cents in the third. Wall Street was expecting a profit of 33 cents a share. Look out below.
Beyond.com (Nasdaq: BYND) will join Salon.com on the loser list. The online software and e-commerce service provider said it will take a restructuring charge of between $11 million and $14 million in its first quarter. Beyond.com can't even get its restructuring charges right. The company originally projected a charge of $2 million to $3 million.
Welcome to the new economy -- for every "have" there's at least two "have-nots."