Yahoo posts profit, beats estimates

The leading Web portal company posts a profitable first-quarter report and beats Wall Street estimates.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
3 min read
Yahoo today posted a profitable first quarter and beat Wall Street estimates by 3 cents a share.

Yahoo, which marked its third consecutive quarter in the black, reported net income of $16.4 million, or 7 cents a share. But excluding one-time charges for research and development and other items, the company's net income was $25.1 million, or 11 cents a share.

That's 3 cents higher than analysts' expectations of 8 cents a share, according to First Call. The quarterly figure is also substantially higher than the $3.27 million, or 2 cents a share, reported a year ago.

The leading portal company's revenues climbed to $86.1 million, up from $30.1 million a year ago. Yahoo's traffic grew to an average of 235 million daily page views in the month of March, up from 167 million in December.

Analysts were for the most part pleased with the robust numbers, saying that Yahoo's earnings reports have become indicators of the Internet sector's health.

"Revenues grew faster than expectation, while expenses did not," said Lise Buyer, an equity analyst at Credit Suisse First Boston. "That means the company's rolling faster than anybody expected and is more profitable. And some day Internet investors will care more about profitability than they do today."

Although Yahoo's stock closed the day down 3 percent, the company's share price had jumped in recent days in anticipation of today's earnings report. At one point yesterday, the stock soared 60 points higher than last week's closing price before the Good Friday holiday.

Yahoo, which has seen its share price roughly double since the start of the year, has been busy using its stock to acquire companies during the quarter. The portal announced in January that it would buy community builder GeoCities in a stock swap valued at $3.56 billion. The deal is designed to increase the stickiness of Yahoo's site, giving users a reason to linger.

Also during the quarter, Yahoo negotiated an acquisition of Broadcast.com. Yahoo, which announced that deal this month, said it would buy Broadcast.com for $5.7 billion in a stock exchange, helping the portal's effort to stay competitive in high-speed Internet services.

And the company is far from the end of its acquisition spree. Company executives said they plan to pursue other acquisitions this year.

"They have the currency, and they definitely will be shopping," said Scott Ehrens, an analyst at Bear Stearns.

Many analysts and observers also expect Yahoo to announce more broadband distribution deals. With its acquisition of Broadcast.com as a starting point to deliver multimedia applications, Yahoo is looking to capitalize on high-bandwidth applications for use both at work and, increasingly, at home.

The company See related Newsmaker: 
Mapping Yahoo's future has emphasized that it wants to remain "bandwidth agnostic" in its broadband strategy, meaning it will make distribution agreements with many access platforms instead of just one, according to Yahoo president Jeff Mallett.

"We are going to have a number of distribution agreements with the satellite guys and [Regional Bell Operating Companies] guys and cable services," Mallett said. "We anticipate nonexclusive distribution agreements over the next few months."

Mallett said Yahoo does not have plans to acquire companies in the offline space, such as a media or communications company, as some have speculated. Yahoo is opting instead to continue adding Web-based assets to its near-term acquisition list.

"One of the best leveraging points we have is with the media and communications company," Mallett said. He added that not having equity in a media company "allows us to get hundreds of partners."

Mallett also said Yahoo will continue its push onto different non-PC devices, though he does not expect the market to take off until mid-2000.

Earlier this week, Yahoo struck a deal with Online Anywhere to extend its reach to handheld devices and television-based Internet appliances such as WebTV.