Services & Software

Investors, analysts still bullish on Yahoo

Despite an apparent hacker attack that crippled Yahoo's site for several hours, investors are forgiving.

Despite an apparent hacker attack that crippled Yahoo's site for several hours yesterday, investors today were forgiving.

Shares of the portal giant were up $19.50, or about 6 percent, to $373.50 at the 1 p.m. PST close of regular trading.

"Wall Street is more accepting of attacks than site failures, especially if the failures are continual, (as) with AOL and eBay, and some e-commerce companies during the holidays," said James Preissler, a PaineWebber analyst. "Then it's seen as an execution problem."

He noted, however, that investor sentiment can change if a company is not able to defend itself against repeated hacker attacks.

Just today, online discount retailer suffered serious site delays, which prevented users from accessing the site for almost three hours. The outage coincided with the firm's public offering, which raised $182 million.

Yahoo said yesterday that a "distributed denial of service attack" overwhelmed its Web hosting company's routers beginning around 10:20 a.m. PST and ending shortly after 1 p.m. PST. In a denial of service prank, an attacker can deluge a Web site's equipment with too many requests for information, effectively clogging the system, slowing performance or crashing the site altogether.

The FBI said today that it is meeting with Yahoo to decide whether an investigation is warranted.

"We are reaching out to Yahoo today and will make a determination...whether or not the facts as presented will initiate a federal violation," said FBI spokesman George Grotz. "I don't know as of yet whether we will investigate."

Derek Brown, a WR Hambrecht analyst, said that investors may have yawned at Yahoo's outage because they have come to expect minor crashes at Web sites.

Yahoo's outage was short-lived, and analysts said that as a result, the effect on the company's revenues likely will be inconsequential.

"It was kind of a routine Monday, and a two- to three-hour outage in the long run won't affect the company's financial performance," Brown said. "I'd be surprised if there's any residual tainting of the Yahoo name."

Yahoo's quick response to the attack likely gave investors a sense of confidence and enthusiasm, analysts said. Given that Yahoo, like other big-name companies, is especially prone to attacks by hackers, they said this first-time attack is a testament to Yahoo's tight security system.

But had the outage spanned a few days, the financial effect could have squeezed Yahoo's revenues, Preissler said.

Analysts also said the attack should serve as a warning to other sites to beef up security measures.

"Yahoo is perceived as a successful company," Preissler said. "If this could happen to them, I think it should give a lot of other players pause and cause them to rethink their security strategy."'s Evan Hansen contributed to this report.