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DoubleClick&#039&#039s quarter could have been worse

All things considered, the fourth quarter wasn’t so bad for DoubleClick. It managed to beat lowered estimates in the quarter and, more importantly, made only slight modifications to its previously lowered 2001 guidance.

The online advertising and services provider posted a profit of $216,000, or breakeven on a per share basis, on sales of $132.3 million.

First Call Corp. consensus expected DoubleClick to lose 2 cents a share in the quarter following its profit warning in December.

Coming off of Yahoo!'s (Nasdaq: YHOO) fourth quarter report and 2001 outlook, it was reasonable to expect the worst from DoubleClick.

DoubleClick closed off $1.19 to $11.25 ahead of the earnings report before moving up to $12.94 in after-hours trading.

Analysts originally pegged DoubleClick (Nasdaq: DCLK) for a profit of 2 cents a share in the quarter.

The $132.3 million in sales represents a 41 percent improvement from the year-ago quarter when it posted a loss of $1.7 million, or 2 cents a share, on sales of $93.7 million.

Analysts were expecting fourth-quarter sales of around $127.4 million.

Investors may be encouraged by the company’s ability to transition from one primarily dependent on advertising sales to one that now derives most of its profits and sales from technology offerings.

In the fourth quarter, DoubleClick’s advertising server business posted sales of $61.5 million, up 114 percent from the year-ago quarter. It served more than 185 billion ads in the quarter, up from 77 billion ads in the same period last year.

Company officials said ad server sales were especially strong in Asia.

Its media sales, essentially advertising sales to traditional and so-called “new economy” companies, came in at $60.4 million, up 19 percent from the year-ago quarter but down 6 percent sequentially.

Dana Serman, an analyst at Lazard Freres & Co. predicted DoubleClick would post media sales of only $55 million and total sales of $127 million.

"It was a very tough quarter so most of the news is in the stock," Serman said following the conference call. "The question now is how much will people be willing to pay ahead of what looks to be the light at the end of the tunnel."

DoubleClick’s data services business improved 5 percent from the year-ago quarter to $17.8 million.

CEO Kevin Ryan was upbeat about 2001, saying DoubleClick will continue to grow its technology and data services businesses while relying less on advertising sales.

“Companies are not changing from Internet advertising to radio or television,” he said during a conference call. “We’re seeing companies cut back on advertising sales overall. That’s an important distinction.”

Heading into fiscal 2001, DoubleClick now expects to post a loss of between 7 cents to 9 cents a share in the first quarter, including at $2.5 million charge related to the development of its email marketing business. Wall Street expected a loss of 6 cents a share, excluding charges. Sales will come in between $110 million to $115 million, below the $118.2 million currently projected.

For the year, it sees sales improving 6 percent to 12 percent and earnings of 7 cents to 9 cents a share, including $5 million in charges related to the development of its email business. First Call projected 2001 earnings of 11 cents a share, excluding charges.

"Visibility for 2001 is still very unclear and DoubleClick was very upfront about that," said Chris Hansen, an analyst at Banc of America Securites. "All in all, I guess there was relief that the outlook wasn't much worse than expected."

Ryan pointed out that although its advertising sales improved more than 100 percent in the fiscal year from 1999, that segment will only contribute between 17 percent to 20 percent to gross profit margins in 2001, down from 30 percent in 2000.

CFO Stephen Collins said he expects total sales to come in between $517 million to $590 million in the fiscal year, a range he feels is “reasonable” considering the weak advertising market and the macroeconomic slowdown being felt throughout the information technology universe.

For fiscal 2001, DoubleClick expects data services sales to improve 20 percent and technology services to jump 30 percent to 35 percent. Media sales are expected to decline 25 percent to 30 percent from fiscal 2000.

Last quarter, DoubleClick met analysts’ estimates when it posted a profit of $3.7 million, or 3 cents a share, on sales of $135.2 million.

DoubleClick shares rallied up to a 52-week high of $131.25 last January before plunging to a low of $8 in December.

Sixteen of the 25 analysts following the stock rate it either a “buy” or “strong buy.”