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Yahoo's loss is still a gain

Yahoo reports a third-quarter loss three times worse than figures of a year ago but still better than Wall Street's expectations.

Yahoo (YHOO) today announced a third-quarter loss of $1.1 million, three times larger than its loss a year ago but still better than Wall Street's expectations.

The loss, which translates to 4 cents a share for the quarter ending September 30, compares with a loss of $371,000 a year ago, or 2 cents a share. The figures, announced after the market's close, surprised analysts who had been expecting a 7 cent loss per share.

"Yahoo exceeded expectations on traffic, revenue, and pricing," said Shaun Andrikopoulos, an analyst with Alex. Brown. "Our revenue forecast was for revenues of $4.2 million, but they did better than that with higher-than-expected traffic."

The company reported quarterly revenues of $5.5 million, a substantial jump from $288,000 a year ago. In comparing its revenue performance to the previous month, Yahoo saw a 68 percent increase over the second quarter.

The company attracted 340 advertisers during the quarter, up from 230 in the previous three months. It also reached a milestone of more than 1 billion pages viewed by users in that period.

"We are strongly committed to maintaining our leadership position and will continue to invest heavily in building the Yahoo service and extending the Yahoo brand on a global scale," said Tim Koogle, the company's chief executive and president.

Yahoo officials told analysts that it plans to ramp up its direct sales force, which will add to the outside firms the company is currently using.

"It's a strategic move to make them more competitive. It's a key piece of the puzzle that Yahoo has put together. You need your own staff to be interactive media navigators," Andrikopoulos noted. "The risk, however, comes in that the advertising business is relationship-driven, and some contacts could be lost as these changes are made."

He added that the fourth-quarter results may be affected by the additional cost of a direct sales force.

But Gary Valenzuela, chief financial officer, said that given the traffic and properties that Yahoo is building, it makes sense to have more people selling their service. "If you have additional revenue, then the business model will remain intact," he said.

He noted the current efforts to build the direct sales force are already under way and will continue for up to another six months.