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Yahoo swings a profit

Another profitable quarter again takes Wall Street by surprise.

Yahoo (YHOO) knocked out its second-consecutive quarter of profits today, again taking Wall Street by surprise.

The search engine company, which reported its earnings after the market's close, posted net income of $210,000, or 1 cent a share, for its first quarter ending March 31, compared to net income of $81,000, zero per share, for the same period in the previous year.

Yahoo's share price ended today at 34-1/2, up 1-1/4 from yesterday's close.

Wall Street underestimated the search engine's performance. Analysts expected a loss of 3 cents a share, according to First Call.

The company reported revenues totaling $9.5 million for the quarter, compared to $1.7 million for the same quarter last year.

"We carefully managed our business and got a little more growth than we hoped for," chief executive Tim Koogle said.

He noted that the flow of advertising dollars to mainstream media, which includes the Web, usually slows during the first quarter. But this quarter the amount of ad dollars moving to the Web grew, as did Yahoo's number of advertisers and site traffic.

Yahoo, which has been evolving into a destination on the Web, from a stepping stone to other sites, saw its traffic more than double to an average of 30 million page views a day during March, up from 20 million in December.

The company also signed up 700 advertisers in the quarter, up from 550 the previous quarter, analysts said.

"Their ability to grow traffic and advertising is unparalleled," said Paul Noglows, an analyst with Hambrecht & Quist. "The key metrics that these guys show and their ability to keep it coming through leads me to believe they'll remain profitable going forward, while maintaining their aggressive growth."

Goldman Sachs analyst Michael Parekh said Yahoo's international sales performed well, especially in Japan. The company reported Japan's page views reached 2 million per day in March.

Jamie Kiggen, an analyst with Cowen & Co., cautioned investors that Yahoo's results are no guarantee other search engine companies will enjoy the same.

Koogle said the company remains on track to reach sustained profitability in 1998. He noted that the company's profits may fluctuate slightly above or below the break-even point during the rest of the year, depending on its operations investment to maintain market share.

"If we make a little money, that's great. But if we overinvest this year and do less than break-even, that's OK too," Koogle said. "We plan to continue to grow Yahoo's properties and presence and are aimed at taking market share."

The company plans to continue to aggregate specialty programming, such as personal finance content spread across other media properties.

Yahoo, for example, added several new services in the first quarter, including chat, classifieds, The Motley Fool's personal investment information, and Beatrice's Web Guide. The last is an interactive site designed to deliver reviews and tips about the best Web sites for women.

The search engine also launched Yahoo Seattle, Yahoo Dallas, and Yahoo Austin during the quarter to expand its growing list of regional guides. These sites combine local content, news, and entertainment programming, in addition to bulletin boards, classifieds, yellow pages, and interactive maps.

And Yahoo continued to expand its international services in the United Kingdom, France, and Germany.

Koogle said more such metropolitan and international sites will launch in the future.

In March, Yahoo teamed up with Netscape Communications (NSCP) to manage the Destinations page on Netscape's Web site. The site, to be renamed Netscape Guide by Yahoo, will launch in the second quarter.