DoubleClick Blows Street Away

Web ad leader DoubleClick topped Wall Street estimates and its own guidance, with a fourth-quarter improvement in net losses and revenues.

The New York-based firm posted a net loss of $64 million, or $0.48 per share, on $96 million in revenue — a 3.7 percent increase in income from third quarter. Last quarter, DoubleClick posted a net loss of $103.5 million, equivalent to $0.77 per share. (That net loss included a $63.3 million impairment writedown and other one-time charges.)

On a pro forma basis, the firm posted a $1.7 million profit, or $0.01 per share, handily topping analysts’ expectations for the firm to post a $0.05 per share loss, according to Thomson Financial/First Call. (The performance also topped DoubleClick management’s earlier guidance.) Last quarter, the industry leader saw a pro forma loss of $12.6 million, or $0.09 per share.

For the full year, DoubleClick reported a net loss of $2.02 per share, on $406 million in revenue. Barring one-time charges, the company reported a full year pro forma loss of $0.24 per share, six cents’ greater than Wall Street consensus. (Last year, DoubleClick’s revenues topped $505.6 million, it posted $155.9 million in net losses, and pro forma losses totaled $13 million.)

Despite the decline in full-year revenues, the company’s quarter-to-quarter improvements mark a stellar performance in an industry in which many players are struggling. Recent months have seen major sites and portals experimenting with adding paid services to supplant a lack of advertising revenue.

For its part, DoubleClick has attempted to weather the storm by downsizing, primarily in its ad sales group, and by focusing on more profitable areas of its business: ad serving technology, research, and data.

The company trimmed operating expenses by 13 percent in 2001, to $286 million. By the end of the year, DoubleClick employed 1,450, down 25 percent from 2000. The company also said it excited the quarter with $752 million in cash and marketable securities.

“In an extraordinary year for our industry, we built on our profitable core businesses, closed strategic acquisitions, and retooled our operations for greater efficiency, ” said DoubleClick chief executive Kevin Ryan. “We have created a highly-focused team committed to profitability and making marketing work better for our advertising and direct marketing clients.”

Added chief financial officer Bruce Dalziel: “Volumes have stabilized, and our cost-cutting initiatives are beginning to deliver results to the bottom line … We have proven that we can manage through a difficult economy and still deliver value to shareholders.”

In keeping with its shift toward technology, revenues from DoubleClick’s TechSolutions division again represented the bulk of the company’s income for fourth quarter. The unit’s $51.8 million in revenue also represented a 7 percent increase from third quarter.

DoubleClick’s Data division brought in revenues totaling $19.6 million. That’s a disappointing figure, down slightly from last quarter’s $24 million. However, the company said the division, comprised principally by its Abacus Direct subsidiary, was negatively impacted by an across-the-board decline in catalog marketing expenditures.

Another surprise came from DoubleClick’s Global Media division. Despite industry-wide rumblings about the possibility that DoubleClick plans to exit its ad sales business because of the practice’s slipping contributions to the bottom line, Global Media brought in $27.2 million in revenue, up an astounding 22 percent from last quarter.

“This past quarter, North American Media reduced headcount 30 percent while increasing revenues by 8 percent,” said Jeffrey Silverman, vice president and general manager of DoubleClick’s North American Media group. “In the fourth quarter 2001, we saw both traditional direct marketers and brand marketers, such as Castrol Motor Oil, utilize the Internet as a marketing solution, and I am excited about the increased momentum.”

But it’s not all good news for the industry bellwether. Next quarter, DoubleClick said it anticipates lower revenue and wider pro forma losses: between $0.03 and $0.06 per share, on between $82 million and $87 million in revenue.

For the full year, DoubleClick projected revenues between $330 and $400 million — roughly flat with 2001.

Naturally, such guidance suggests there being no immediate end in sight for the advertising industry’s current malaise. But Dalziel downplayed the gloomy report, painting it as merely being fiscally responsible.

“We are in growth businesses that are somewhat linked to the economic cycle,” Dalziel said. “Forecasting flat revenues ensures we keep a strong discipline on the cost side as the economy emerges.”

“We are a leader in great businesses, with a scalable model and a proven leadership team capable of managing the business in challenging environments,” he added. “These qualities and our strong balance sheet will position us to take maximum advantage of more favorable economic conditions in the future to drive revenue growth, cash flow and profits.”

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