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Wall Street seeks clues of Yahoo rebound

As the Internet company prepares to wine and dine media buyers, analysts are pondering whether its advertising business has bottomed out.

As Yahoo prepares to wine and dine media buyers, Wall Street analysts are pondering whether the Internet company's advertising business has bottomed out.

Yahoo will reach out to advertising agencies later this week in a Princeton, N.J., gathering that will feature co-founder Jerry Yang and a wine-tasting, the company said. The gathering will run Thursday and Friday and is one of a series of meetings the Sunnyvale, Calif.-based company has held.

Wall Street analysts are making a few guesses about the Web portal's turnaround prospects. Wit SoundView analyst Jordan Rohan reduced third- and fourth-quarter revenue estimates for the company Tuesday, saying in a research note that checks with Yahoo advertisers revealed "that May proved to be more challenging than April."

In a research note, Rohan said Yahoo could face a tough second half of the year.

Rohan lowered third-quarter revenue predictions from $172 million to $166 million and dropped fourth-quarter revenue predictions from $203 million to $195 million. He lowered earnings estimates for 2001 from 5 cents per share to 4 cents per share and for 2002 from 15 cents per share to 14 cents per share.

"We believe that next year will be better than this year, but we are not forecasting that Yahoo can resume the healthy growth rates to which investors had previously grown accustomed," he wrote. "The 'easy' dot-com money has disappeared, and Yahoo faces increased competition in garnering traditional advertising dollars, particularly as emphasis is placed on integrated, cross-platform media buys."

That report comes just a day after SG Cowen Securities analyst Scott Reamer upgraded Yahoo to a "neutral" from a "sell," based on his checks with advertisers.

"Our most recent channel checks with the advertising community indicate that the overall budget environment has stopped getting worse, and (Yahoo) is beginning to turn the corner with many traditional advertisers and agencies, particularly as the company shows an understanding that Internet advertising going forward will have to be about a lot more than buttons and banners," he wrote.

"In our talks with agencies, this was the first time we ever heard positive feedback on Yahoo," he said.

But Reamer declined to raise estimates for the second half of the year, pointing out that Yahoo will soon be heading into the seasonally weak third quarter. He estimates that Yahoo will post a 5 cents per-share profit in fiscal 2001 and a 20 cents per-share profit in 2002.