Weak Advertising Has Yahoo Posting 6th Straight Loss

PALO ALTO, Calif. – Internet media company Yahoo! Inc. (YHOO) Wednesday reported its sixth straight quarterly loss, but increased its forecasts for the rest of this year, saying efforts to find new sources of revenue were starting to pay off.

Still, the company said its core online advertising business remained depressed, with revenues in the division falling some 15 percent from already weak levels in the year-ago first quarter.

Yahoo's stock, which had initially risen about 45 cents over its $18.44 per share closing price when the earnings were released, later drifted down to $17.95 in after-hours trade. Analysts cautioned that while the company was on a comeback course, it still faced several bumps along the way.

Yahoo reported a first-quarter net loss of $53.7 million, or 9 cents per share, compared with a net loss of $11.5 million, or 2 cents per share, the year before.

On an operating basis, excluding unusual items, the company turned a profit of $10.5 million, or 2 cents per share, compared with a loss of $11.5 million, or 2 cents per share, last year, in line with analysts forecasts.

Offsetting the company's persistently weak advertising business, were a number of bright spots. Yahoo said the acquisition of HotJobs, completed during the first quarter, produced an immediate surge in traffic to its site. When the company featured a HotJobs link on its start page one day recently, the increase in job seekers visiting the site was comparable to that seen after a 30-second Super Bowl ad.

In addition, revenues for paid search listings, provided through a partnership with Overture Services Inc. showed strong growth, as did some new fees from a number of services, like Yahoo Personals, that the company used to provide for free.

Yahoo, which in prior earnings reports has highlighted the large number of people who visit its site, this time stressed that it had built up a base of 500,000 paying customers.

The company's total revenue rose to $192.7 million from $180.2 in the year-ago first quarter, which was well above forecasts for revenue of $175.3 million, partly reflecting the contribution of revenues from HotJobs which had not previously been factoring in.

Forget the Year 2000

Yahoo Chief Executive Terry Semel, who joined the company a year ago, told analysts that the revenue breakdown reflected a dramatic change made in its business model. Advertising revenue, which once accounted for 90 percent of total revenue, was just 63 percent of the mix during the latest quarter.

Yahoo said revenues from paid listings and other fee-based services such as Yahoo Personals totaled $55 million during the quarter, while transaction revenues from commerce and customer acquisition totaled $17 million.

The company has been working for well over a year to diversify away from online advertising by adding more fee-based services.

"I don't think they've transitioned quickly," said U.S. Bancorp Piper Jaffray analyst Safa Rashtchy. "But Semel is doing what he said he would do, making gradual improvements."

Still Rashtchy stressed that his general optimism over Yahoo's turnaround strategy was tempered by the belief that the performance it saw in the year 2000 was a fluke.

"Maybe they should look to 1998 and 1999 and take 2000 out of the model," said Rashtchy. "That was a bubble that we probably won't see again."

At its peak, in the fourth quarter of 2000, Yahoo reported total revenues of $310 million, or about $117 more than it reported on Wednesday.

Yahoo said it now expects to report second-quarter revenue of between $205 million and $225 million, and to show full-year revenue of between $870 million and $910 million. These latest forecasts reflect a big increase over current analyst projections for revenues of $193 million in the second quarter and $797 million in the full year, although many had not previously included HotJobs in their numbers.

Yahoo said it expects HotJobs to contribute between $20 and $25 million to second quarter revenues.