Yahoo! Revises Estimates Upward, Reports Profit

Portal giant Yahoo! Wednesday reported a first quarter profit of $46.7 million, or $0.08 per share, helped by revenues that shot up by 47 percent from the same time last year, fueled partly by a jump in subscription fees.

The results, which beat analysts’ expectations, continued a four-quarter profitability streak for the media company, which predicted it would do better this year than it had previously expected.

The company brought in revenues of $282.9 million, a 47 percent increase from the year-ago period and 3 million less than in the fourth quarter — a slight decrease that could be accounted for by the seasonal drop in marketing expenditures.

Raising their predictions for the full year 2003, executives said they expected revenues of $1.22 to $1.28 billion. Previously, the company had said revenues would come in at between $1.15 and $1.22 billion for 2003.

The lion’s share of that dough, $190 million, continued to come from marketing services, including paid search. That was up 38 percent from the same period in 2002. Although the company has worked to diversify its revenues to lessen its dependence on advertising during the prolonged ad downturn, company executives are saying they expect their marketing services business to be a big driver of growth.

“We are starting to see real strength in our core marketing services business,” said Yahoo! CEO Terry Semel in an earnings conference call. “We believe we are at the very beginning of the ad market on the Internet.”

Semel attributed growth in marketing services to three factors: the
Internet’s ability to provide just-in-time media, the company’s strategy of selling to verticals, and the increasing popularity of paid search services. Semel said contract renewals had been stronger, and the size of contracts had grown, as well.

Paid search has gotten a lot of attention as a growth area within Yahoo!, the company having recently unveiled new search functionality aimed at encouraging, and better monetizing, search across the Yahoo! network. The changes are a part of Yahoo!’s strategy to integrate Inktomi, the search technology company it bought earlier this year.

Fee-based revenues, which the company has increasingly emphasized as of
late, came in at $63.7 million, a growth of 61 percent compared to the same period last year. Yahoo! said it had increased its number of paid members from 2.2 million to 2.9 million over the quarter, with the SBC Yahoo! DSL Internet access partnership accounting for most of the growth, and with Yahoo! Personals coming in next.

Listings revenues, driven mostly by the incremental contribution of revenue from HotJobs, brought in $29.3 million, an 89 percent increase from the same period in 2002.

The company feels itself to be in solid financial shape, and is well positioned for future acquisitions. Last week, it sold $750 million in convertible bonds, capitalizing on market conditions and giving it an infusion of dough that could be used for operating expenses, or future acquisitions.

For the full year 2003, Yahoo! expects to see $350 to $380 million in EBIDTA.

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