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Yahoo! Stock Slides as CEO Steps Aside
   Fox Market Wire
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Shares in Yahoo! Inc, the formerly hot Web portal, dropped by as much as 20 percent Thursday as JP Morgan, Merrill Lynch and SG Cowen downgraded their ratings on the stock.

The company announced Wednesday that CEO Tim Koogle, who has been with the company almost since it started, will step aside when a replacement is found. He will stay on as chairman.

The company also stated that its first-quarter operating earnings will come in at "approximately break-even," well short of Wall Street's expectations. Full-year results also could miss targets.

"The best dot-com can't make it, and that's troubling for the entire Internet economy," said Jordan Rohan, media analyst for Wit Soundview. "If Yahoo is only marginally profitable, then players like Terra Lycos don't stand a chance. And smaller players aren't even in the game."

Trouble in Paradise

After starting as a Stanford University-based search engine in the mid-1990s, Santa Clara-based Yahoo! transformed itself into a full-service information-and-shopping portal and at one point was the world's most popular destination on the World Wide Web.

Yahoo! also was one of the Internet's biggest financial success stories, with revenue nearly doubling last year, to $1.1 billion, with profits of $291 million.

But the company's dependence on advertising, which accounted for nearly 90 percent of last year's revenue, has proven problematic in the dot-com meltdown. The overall slowing of the economy has also forced non-tech companies to slash their spending on marketing.

Yahoo! has also been suffering turnover in a number of its top divisions — in recent weeks, the company's heads of operation for Asia and Europe have resigned.

For months, rumors have circulated that Yahoo! would merge with another company, most likely an entertainment titan such as Walt Disney Co. or Viacom Inc. that could help it compete with the AOL-Time Warner Inc. behemoth. Speculation also arose that it would merge with eBay, one of the few other profitable service-oriented Web sites.

Koogle, however, has been saying a merger with an entertainment giant could actually reduce the site's highly valued breadth of content.

Last week, Yahoo! adopted a shareholder-rights plan, known as a "poison pill", that would likely deter any attempt at a hostile takeover. The company said the plan was not "in response to any effort to acquire control of Yahoo!," however.

Earnings Fall Well Short of Expectations

Yahoo! said it expects to break even in the first quarter, which ends March 31, excluding one-time charges. Analysts surveyed by First Call/Thomson Financial had been expecting earnings of 5 cents per share, down from 10 cents a year ago.

For all of 2001, analysts were expecting earnings of 36 cents a share. Yahoo stopped short of issuing formal guidance for the year because business conditions for the final six months are unclear, but chief financial officer Susan Decker said Yahoo! was "committed to achieving break-even levels of profitability."

Yahoo!, which will formally announce earnings on April 11, also said it expects first-quarter revenues of between $170 million and $180 million; a year ago, Yahoo posted revenue of $228.4 million.

Even worse, deferred revenue from 2000 will account for a whopping $117 million of this quarter's sales figure.

The Associated Press contributed to this report

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