Yahoo 3rd-quarter profit doubles

Rise in ad sales pushes company to best revenue

October 09, 2003|By BLOOMBERG NEWS

SUNNYVALE, Calif. - Yahoo Inc., owner of the most-used group of Internet sites, said yesterday that its third-quarter profit more than doubled because it sold more advertising. Revenue of $356.8 million was a company record.

Net income increased to $65.3 million, or 10 cents a share, from $28.9 million, or 5 cents, Yahoo said in a statement. Revenue rose 43 percent.

Chief executive Terry Semel has boosted ad sales by offering "sponsored search" advertising in which companies pay to have their Web sites listed prominently in Internet search results. He's also selling more ads on other parts of Yahoo's Web sites to companies such as PepsiCo Inc. and Ford Motor Co.

"The quarter's results really highlight the leverage that the Yahoo business has," said Anthony Valencia, an analyst at TCW Group Inc. in Los Angeles. "It's just really phenomenal that they've been able to grow revenue the way that they have." TCW held 28.9 million Yahoo shares in July.

The profit was a penny more than the average estimate of 9 cents a share from analysts surveyed by Thomson Financial. Revenue topped the average estimate of $337.9 million.

Yahoo said it expects to report 2003 income from operations of as much as $286 million. The company had previously forecast income from operations of no more than $260 million for the year.

Yahoo's shares fell 14 cents to close at $38.79 in Nasdaq stock market trading, but rose to more than $39 in extended trading after the results were reported. The stock has soared more than fourfold over the past year.

Yahoo began offering sponsored-search services in November 2001 under an agreement between the company and Overture Services Inc., which provides sponsored-search listings for other Web sites, including Microsoft Corp.'s MSN.

Yahoo completed its acquisition of Overture on Tuesday for $1.83 billion in stock and cash. That followed its purchase in March of search-engine developer Inktomi Corp. for $235 million.

The company also redesigned its search engine in April to try to take traffic from Google Inc., owner of the world's most-used search engine. And Yahoo is using Inktomi's and Overture's technology to develop new services, including one started last month to help consumers who shop online find products they want to buy.

The company has said it's selling more advertising in other parts of its Web sites, separate from the ads placed in search results. The sites have run ads from two-thirds of the 100 biggest buyers of advertising, including PepsiCo, Ford and Vivendi Universal SA's Universal Studios, Semel said last month at an investor conference.

Yahoo also is selling more subscription services to consumers. Those include a high-speed Internet-access service that Yahoo offers in partnership with regional phone company SBC Communications Inc.

Yahoo has $750 million in debt, equal to 22 percent of its total capital, from some convertible notes the company issued in April. Yahoo was debt-free a year ago.

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