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Yahoo posts strong earnings, splits stock

The leading Web portal's fourth-quarter net income exceeds analysts' expectations, as holiday advertising and e-commerce revenue soars.

Leading Web portal Yahoo today reported that fourth-quarter net income exceeded analysts' expectations, as holiday advertising and e-commerce revenue soared.

The company also announced a 2-for-1 stock split.

Yahoo reported net income of $57.6 million, or 19 cents a share, for the period ending Dec. 31. That compares with income of $12.9 million, or 4 cents a share, for the same period a year ago.

Analysts expected Yahoo to earn 15 cents per share, according to First Call. Some estimates climbed as high as 18 cents.

"Yahoo executed on its model," said Safa Rashtchy, an equity analyst at Piper Jaffray.

Rashtchy pointed out that Yahoo's international growth was one highlight. He estimated that 30 percent of its traffic came from outside the United States, and he said 13 percent of Yahoo's revenues came from abroad as well.

"You will see that gap of 30 percent traffic to 13 percent of revenue closing in the coming quarter," he said.

At the 1 p.m. PST close of regular trading today, Yahoo shares were down $38.56, or about 9 percent, to $397.50. The company released its results and news of the split after the close of regular trading. In after-hours trading the shares dipped to about $380.

The after-hours dip was most likely because of a knee-jerk reaction to Yahoo chief financial officer Gary Valenzuela's boilerplate comment that sequential growth would be dampened by seasonality next quarter, according to Rashtchy.

"Gary said you can't expect this level of revenue, which is something he says every time," Rashtchy said.

In addition, investors may have been disappointed that Yahoo's 19 cents a share results were lower than the expected 20 cent-plus whisper numbers, Rashtchy added.

Revenues for the final three months of 1999 were $201 million, up 120 percent from the $91 million it reported during the same period the prior year.

Yahoo said that during December, its traffic increased to an average of 465 million page views per day, compared with an average of 167 million page views per day in December 1998.

Today's earnings report comes You've got Time Warnera day after America Online and Time Warner announced their intention to merge. The merger would create an Internet commerce, media and entertainment giant on both narrowband and broadband cable connections.

The union between Internet and media has sent speculation flying that Yahoo could strike a deal mirroring that of its online rival. Industry analysts have pointed out that media companies such as the Walt Disney Company, General Electric's NBC and Viacom/CBS would become contenders if Yahoo decided it needed a media partner.

But Yahoo today stuck to its party line. Executives re-emphasized their refrain that they will remain an independent platform for bandwidth and content.

"We've been agnostic to access, and that's benefited us a whole lot," Tim Koogle, Yahoo's chief executive, said during a conference call with financial analysts.

Yahoo chief operating officer Jeff Mallett added: "We think the value is creating an umbrella brand over many categories. It limits your audience if you pick one single brand or one single content source combination. It's not broadly what our users will be looking for."

The executives' comments did not surprise John Segrich, an equity analyst at CIBC Oppenheimer, who follows Yahoo. Although Yahoo may never invest in owning a bandwidth carrier, it could maintain content providers in its site to continue growing its business.

"Probably for the time being, it means they're not intent now on going after a Disney or a Viacom, but maybe smaller content providers could potentially be in its sites," Segrich said.