Where Are They Now? Search Engine Stocks, Three Years Later

If you imagine Internet companies as rock’n’roll stars, Netscape would
have been Elvis. The company shocked the investment world in with a
hip-swiveling IPO that soared to $78 on the first day of trading on Aug. 9, 1995.

Eight months later, in April 1996, three search engine companies–Lycos, Excite and Yahoo!–launched their own initial public offerings
(followed a month later by a fourth, Infoseek).

And just as the British Invasion in 1964 heralded the beginning of a new era in rock music, so too did this group of IPOs mark the start of the
Internet Era for investors.

Like The King, Netscape is no longer with us. But Lycos, Excite and Yahoo! live on, though as portals and not mere search engines. Today
we’ll
take a quick look at Yahoo!, a company started by two Stanford
University
graduate students.

By nearly every measurement, Yahoo! is the most successful of the trio,
which, to extend the music metaphor, probably makes it the Beatles of
the Internet.

The company, based in Santa Clara, Calif., is on a huge roll right now.
Unlike Excite and Lycos (and just about every other Internet company),
Yahoo! has proven it can turn a profit. Last week it reported its third
consecutive quarter in the black, with Q1 revenues of $86.1 million, an
impressive $30 million higher than one year ago.

Yahoo’s increasing financial strength has driven up its stock price
dramatically since mid-December, and recently has traded in the $200 per share range. (The company’s stock also has split three times since
September 1997. For historical data, click here.)

The skyrocketing share price has left Yahoo! with an astounding market
capitalization of $41.5 billion. The company is using this war chest to
buy other companies, including GeoCities (in a $3.56 billion stock swap
announced in January) and Broadcast.com (a $5.7 billion stock deal
unveiled late last month).

While Yahoo! was one of the first search engine companies to mutate into
a portal, perhaps the single
most important factor in its success has
been the establishment of the Yahoo! brand. It is a marketing
achievement that every other
Internet company strives for and only a few, such as AOL, attain.

It also should provide comfort and value for Yahoo! shareholders in the
foreseeable future.

Friday we’ll look at the Kinks, the Who and what’s on tap in the Internet IPO market next week.

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