This is a partial transcript from Your World with Neil Cavuto, July 11, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: Good or bad, Yahoo! (YHOO) soundly beat the Street with earnings reports, but apparently not good enough for some. Merrill Lynch saying that the one-time Internet high-flier remains richly valued and recommended investors sell the stock. Investors initially sided with Merrill, pushing the stock lower. But then at a change of heart, helping Yahoo! finish with about a six-percent gain.

So, what does the man who runs Yahoo! makes of the Street's initial skepticism on this? Earlier, I posed that very question to the company's CEO, Terry Semel.


TERRY SEMEL, CEO, YAHOO!: I think the Street was somewhat skeptical when the year began and we laid out our plan. I think, Neil, in general, we can only focus on the things within our control. We laid out what was a rather aggressive plan for Yahoo! at the beginning of the year, in terms of all of the key metrics, in terms of how we're going to diversify revenue, in terms of businesses we were going to start and/or create and/or build.

And there were a lot of cynics, a lot of folks felt we would never be able to achieve the things we laid out. Well, we not only achieved those things and achieved those metrics, we have fundamentally surpassed each and every one of the important metrics in the first six months. I think in this atmosphere, to have a company raising its revenues for the balance of the year, raising our e-bidder, raising our net profits and raising our free cash flow, those are the kind of things we are in control of. And I am very proud of our accomplishments.

CAVUTO: Still, I think one brokerage house that downgraded your stock today was saying much the effect that you're already priced from perfection. What do you think of that?

SEMEL: Well, obviously, a price is usually relevant to your earnings. And so, for Yahoo! to have had a very positive earnings per share, for Yahoo! to talk about very significant e-bidder growth for the balance of this year, including the first half of this year, and then again for the second half of this year, usually that's a reflection of your value and of your evaluation.

CAVUTO: But aren't they saying something more, sir? Aren't they saying that, look, this is a company, a great company though it is and Terry has done a lot to turn it around, still trading at 60 times those generous earnings. The average multiple in your segment is about a third that.

SEMEL: Yes. But if one continues their work just for another couple of minutes, and they project out where next year would be on a normalized basis, following the guidance we have just given for the balance of this year, they would not be talking about a 60 times multiple. They would be talking about a much smaller multiple. And I really cannot address in my mind the fact that, again, I can only help control the great progress of our company. Why someone would question it today, as opposed to two days ago, or for that matter two years ago, is beyond me.

CAVUTO: How do you think this post Wall Street, avoid anyone whose books are kind of hard to understand or comprehend is effecting you?

SEMEL: On the contrary, our books are very clear and clean. We are a company with no debt. We are a company with very, very small capex needs. When we talk about it, an e-bidder reporting company, fundamentally, that number in net is the same thing. So, we are a very open company, a very clean and conservative accounting company.

CAVUTO: Well, what do you think of the charlatans who aren't?

SEMEL: Well, I think like in anything else in life, most companies probably are, and I'm sure they are, very clean and very straightforward. And in any walk of life, there are always those who are pushing the envelope too far. And I don't endorse that. I think companies have a responsibility to their shareholders and to their employees and to everyone involved.

So, I hope a few don't change the whole world, but clearly there needs to be some help in several directions.

CAVUTO: There have been critics among some of your associates, sir, as you know, that the president did not go far enough when he recommended revamping the way companies handle their transactions and the way they are overseeing. Do you think you did enough?

SEMEL: I think he definitely moved in the right direction, and in some cases, did a very, very good job. I think the new guidelines that we are starting to see, both from the president and/or the SEC and other organizations, most of the things folks are talking about seem quite appropriate.

CAVUTO: Your sense of the advertising environment right now. What I noticed tucked into the report, which was very remarkable, was this enormous upsurge in advertising. We similarly saw out of EW Scripps, the publisher of the Rocky Mountain News and own some cable TV stations, are we seeing a real noticeable turnaround?

SEMEL: What we are seeing is an increase in our advertising revenues because we've really diversified that line, and we really paid equal attention to not only the large advertisers who are very important to our business, both now and in the future, but we developed a much greater appetite and much greater facilities to deal with both small and medium-sized advertisers.

The Internet is uniquely able to do that. And Yahoo!, in particular because of our scale and our diversity of services, really lends itself very, very well to that market as well. So, the combined element of both large, medium and small, we're now talking about and have projected for ourselves a double-digit increase over the second half of this year. I don't know that that's reflective of the entire advertising industry. I wouldn't even try to venture a guess.


CAVUTO: All right. Terry Semel.

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