Pay-for-placement search engine Overture said it’s on-track to post its second-straight profitable quarter.
Citing “inquiries” that prompted it to release the news six days before it was set to announce its results to the markets, Pasadena, Calif.-based Overture said it would “substantially exceed” its earlier guidance for the quarter ended Dec. 31. It did not say by how much it had beaten its earlier guidance.
Previously, the company had given guidance for fourth-quarter revenue of $76 million and net earnings of $10 million, or $0.17 per share. Wall Street had expected earnings of $0.19 per share, according to Thomson Financial/First Call estimates.
The company also announced that it would “significantly increase” its earnings forecast for calendar year 2002. For the full year, the company said it full-year revenue would be 25 percent greater than the $345 million previously given in guidance, while earnings would be $0.79 per share, 75 percent higher. (First Call estimates placed 2002 earnings at $0.52 per share.)
A portion of that increase could be due to an extension of Overture’s agreement with Web portal Yahoo!, which Overture president and chief executive Ted Meisel announced during an investor conference call on Thursday. According to the original deal, Overture would syndicate its paid listings on Yahoo! through the current quarter. Now, that agreement would remain through the second quarter of 2002.
Sources inside the company said that management has been talking up the expected guidance-topping performance for weeks.
Not coincidentally, perhaps, the announcement comes just days after it was revealed that ISP Earthlink had dropped Overture as the search provider for its portal, in favor of Google. Many industry watchers believe that news meant market leader Overture had significant new competition.
Google only recently began syndicating its paid-placement ads, as Overture has done for years. The chief challenge to Overture’s dominance of the space lies in the smaller company’s high favor among Web users — the site is ranked twelfth in Jupiter Media Metrix’ listing of most-visited Internet sites — and its search results distribution deals with Web portals including Yahoo!.
During the investor call, Meisel admitted that he had been contacted by worried investors, but said that the loss of Overture’s contract with Earthlink wouldn’t have a significant effect on its operations. He also waved aside the competitive threat posed by Google.
“I would point out that we have been in a competitive market for several years now,” he said. “On our last investor conference call … we observed that our success would likely invite further competition, and so it has.”
“Any company that looks at our results and thinks our service will be easy to replicate will need to invest heavily over several years to match our scale and quality, only to find that we’re a moving target, and that our success is the result of focused execution, as well as a good idea,” he added.
