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Yahoo's profit more than triples

Yahoo Inc. reported Tuesday a quarterly profit more than tripled from the year earlier, including extraordinary items, boosted by stronger online advertising and its acquisition of Overture Services.
/ Source: Reuters

Yahoo Inc. reported Tuesday a quarterly net profit that more than tripled from the year earlier, boosted by the sale of shares it held in rival Google Inc. and stronger online ad revenue that analysts said may signal good results from other Web search providers.

Internet media company Yahoo is seen as a bellwether for both online advertising and for the performance  of Google, which later this month will report financial results for its  first time as a public company.

“It seems that the biggest source of upside surprise was search advertising,” American Technology Research analyst Mark Mahaney said of Yahoo’s third-quarter numbers.

Such results bode well for Web search leader Google, as well as for second-tier players like Ask Jeeves Inc. and FindWhat.com, which get most of their revenues from search-based ads, Mahaney said.

Google gain
Sunnyvale, California-based Yahoo posted quarterly net income of $253.3 million, or 17 cents per share, including a gain of $129 million from the sale of a quarter of its Google shares and associated tax benefits.

Excluding those items, Yahoo’s profit would have been $124 million, or 9 cents per share, matching analysts’ average call, according to Reuters Estimates.

Yahoo earned $65.3 million, or 5 cents per share, in the third quarter of 2003, when it was still sharing revenue with search advertising company Overture Services, which it bought one year ago as part of a $1 billion investment in search.

Revenue, excluding the fees Yahoo pays to its advertising partners, was $655.4 million, up from $356.8 million last year, to beat analysts’ average call of $644.7 million.

Revenue from Yahoo’s key marketing services segment, which includes search and traditional advertising, rose 212 percent, reflecting the Overture acquisition. Yahoo had 7.6 million paid subscribers, up 1.2 million from the prior quarter.

Yahoo forecast fourth-quarter revenue, excluding traffic acquisition costs, of $710 million to $760 million. Analysts’ forecasts had been in the range of $694 million to $774.2 million, excluding such costs.

“One could say they’re being conservative for fiscal 2004,” said David Garrity, Internet services analyst with Caris & Co.

Internet research aggregator eMarketer projects that Yahoo’s business will account for more than 20 percent of 2004’s estimated $9.4 billion U.S. online advertising market. Included in that is Yahoo’s paid search business, which is expected to capture about 35 percent of the $4 billion advertisers are seen spending on Web search ads this year.

Yahoo Chairman and Chief Executive Terry Semel said he was confident that Yahoo can do at least as well as its rivals in the search advertising market -- “if not overtake them.”