Earnings news boosts Yahoo

Yahoo shares saw some ups and downs today, with the stock rising as high as $204 in early trading, encouraged by the company's strong second quarter earnings report and its 2-for-1 stock split announcement. It later fell 2.1875 to close the day at $184.

Investment banking firm Donaldson Lufkin & Jenrette today raised the Internet directory's 1998 earnings per share forecast to 63 cents from 45 cents. The firm also put Yahoo's share price target at $250 and has maintained a "buy" rating.

The company posted earnings yesterday that surpassed analysts' expectations, reporting pro-forma net income of $8.1 million, or 15 cents a share, for the second quarter, compared with a pro-forma net loss of $300,000, or 1 cent a share, reported for the previous quarter a year earlier. Quarterly revenues jumped to $41.2 million from $14.1 million.

Yahoo had been expected to earn an operating profit of 9 cents per share, according to First Call's consensus of analysts' estimates.

Yahoo's good fortunes briefly had a strong effect on other Internet stocks. Amazon.com shares were up nearly 5 percent at $112.25 before losing 1.625 to close at $105.50. Lycos traded at $81.50, up 5.16 percent, before losing 6.5625 to 70.9375. Excite was trading at $94, up 2.87 percent, before slipping 9.125 to close at $82.25.

The company's net loss widened to nearly $36 million from $21.6 million, including a special charge of $44.1 million related to the purchase of ViaWeb, an e-commerce business. Yahoo previously had warned investors of the charge and the resulting net loss in recent documents filed with the Securities and Exchange Commission.

Yahoo's total revenue was up 192 percent over the same period last year.

In a conference call, Yahoo chief financial officer Gary Valenzuela warned that, despite "strong growth prospects in our industry, these growth rates are unsustainable."

"We are in an extremely competitive market and we need the flexibility to continue to invest in our business?even at the expense of short-term profits," Valenzuela added.

Yahoo also said its traffic grew during June to an average of 115 million page views per day, up from 95 million page views per day during March.

The company also said it has entered into an agreement for a $250 million private placement of common stock to Softbank Holdings, one of Yahoo's largest shareholders. As a result, Softbank now will own 31 percent of the company.

Yahoo's stock split will take effect August 3. Other Net companies, including Lycos,Excite, and Amazon.com already have announced or implemented stock splits.

Company executives remained bullish about the advertising outlook, noting that large companies such as FedEx, Tower Records, and Tobasco recently began running ads on Yahoo. They said the company's retention rate was 89 percent for its top 100 advertisers during the second quarter, and added that they plan to reach out to medium- and small-sized businesses as well.

The company will continue to promote its brand name in foreign markets. "We will continue to reach as broad an audience as possible worldwide," said Yahoo chief executive Tim Koogle.

Yahoo shares closed yesterday at 186.1875, down 4.8125 or more than 2 percent. The stock has traded as high as 207.5 and as low as 22.5833 during the past 52 weeks. Trading in Yahoo shares were halted in advance of the earnings announcement.

But Yahoo's stock rebounded in after-hours trading last night, solidly beating Wall Street estimates for its second-quarter earnings.

Lycos traded at 82.5 after hours yesterday, up from 77.5, according to Instinet. Amazon.com traded on Instinet at 113, up from 107.125 at close of market.

Netscape traded at 39, up from 37.0625, and Excite traded at 95, up from 91.375 at yesterday's close, traders at Instinet said.