RealTime IT News

Investors Unfazed By Yahoo! Attack

Like a supportive friend rushing to the side of a noble mugging victim, the market sent shares of Yahoo! up nearly 5 percent by early Tuesday afternoon after a hacker attack left the leading Web portal's site down for three hours Monday.

As they did in the wake of outages on eBay's (EBAY) site last year, the media immediately spun out stories raising dark concerns about the vulnerability of the Internet to marauding cyber-vandals. And while shares of EBAY slumped after each reported site outage in 1999, investors aren't panicking this time.

That's because they perceive the two cases differently. Whereas eBay has had chronic outage problems, Monday's was the first significant shutdown for Yahoo! (YHOO), especially impressive given that the company handles more Web traffic than anyone except America Online Inc. (AOL).

Also, the damage to eBay after some of its outages last year was financially measurable. Following a 22-hour shutdown in June, eBay announced it would waive $3 million to $5 million in listing fees to compensate sellers whose auctions were canceled.

The company also reported shelling out $8.8 million in Q3 to upgrade its troubled computer systems. Those kinds of numbers go right to the bottom line for investors, and the negative impact on EBAY shares in each instance was swift and certain.

With Yahoo's outage, it's harder to determine a dollar cost. Will losing three hours of operation hurt the company's traffic figures for the month? I hardly think so. Will ad revenue suffer? Even less likely. Will the company be forced to spend millions to improve its security? Don't count on it.

It would take much more than a three-hour outage to shake the market's confidence in Yahoo. Indeed, just one day after Monday's outage, the company's stock received a "strong buy" rating from Deutsche Banc Alex. Brown, despite closing Monday at a lofty $354 per share and even though Yahoo is valued at 168x last year's revenues.


Internet StockTracker, the new weekly e-mail newsletter from internet.com Corp. Every Friday internet.com will deliver to your e-mail in-box the latest performance data on individual Internet companies and their competitors. Internet StockTracker will deliver to you all the statistics you need to assess the week's activity. Subscribe today at e-newsletters