HotJobs could put Yahoo in hot seat

That's what some on Wall Street are speculating after reports surfaced this week that Yahoo's online job listing subsidiary may be seeing hard times ahead.

Most Wall Street analysts are confident that Yahoo will hit its revenue targets. But worries remain, as evidenced by the nearly 15 percent decline in Yahoo's stock Wednesday. Other concerns such as the possible delay in the launch of a DSL (digital subscriber line) service with SBC Communications may also weigh on the company's valuation.

Concerns over HotJobs have been a constant of late. Earlier this month, TMP Worldwide warned that the overall weakness in the job labor market would affect the performance of its online job listing site Monster.com, a competitor of HotJobs. Critics warn that this ripple effect in the job listing market could hurt Yahoo.

"My impression is that HotJobs was touted as one of the growth areas in the company, rightly or wrongly," said James Preissler, an equity analyst at Investec. "After talking to the company and looking at evidence at Monster.com, even if we make the assumption that HotJobs is gaining share, it's still a flat business."

There are no clear indications yet that Yahoo will miss its revenue projections. But if the effects of the labor market hurt HotJobs, investors fear Yahoo revenue may also come up short.

HotJobs has been a savior for the Internet stalwart. Since Yahoo acquired the online job bank in February, HotJobs has added muscle to Yahoo's turnaround pitch to Wall Street. The boost not only allowed Yahoo to show revenue growth over the past two quarters, it also helped bulk up its non-advertising business to 40 percent of its total in the quarter ending June 30.

Growth of non-advertising revenue has been a cornerstone for Yahoo's turnaround plan. During a meeting with Wall Street analysts last November, Yahoo executives outlined a recovery strategy by which they would lessen their dependence on advertising through acquisitions and the introduction of paid services.

So far, this plan seems to be working. Last quarter, Yahoo reported 1 million registered consumers who are paying for services, many of whom purchased additional offerings for e-mail, personals and data storage.

But while non-advertising revenue went up, Yahoo's core business of selling advertising continued to struggle. HotJobs and an increasingly lucrative deal with pay-for-placement Web search company Overture Services allowed the company to report revenue growth despite the economic doldrums of 2001. Without these deals, Yahoo would have shown flat to modest growth from the previous year.

Still, more bullish analysts could not see why concerns about Monster.com earlier this month would translate into Wednesday's sell-off. Although Yahoo does not disclose how much revenue is generated through HotJobs, flat growth in the subsidiary should not have too great an impact on Yahoo's projections.

"There's no credible reason to believe that they'd miss revenue guidance," said Safa Rashtchy, an equity analyst at U.S. Bancorp Piper Jaffray. "I think it's over-pessimism about this stock."