Yahoo! Inc. executives say they're poised
to take advantage of the company's strong profits and the
volatility in the tech sector to snap up smaller firms and
strengthen Yahoo!'s pre-eminence among Web destinations.
The Santa Clara, Calif.-based company on Wednesday again vaulted
above Wall Street predictions, reporting first-quarter earnings
sharply higher than those of a year ago.
For the three months ended March 31, Yahoo! reported net income
of $77.8 million, or 13 cents a share, compared to $1.8 million, or
break-even, in the same period a year ago.
Excluding a $40.7 million gain made from investments and charges
relating to acquisitions and income taxes, Yahoo! earned 10 cents
per share. Analysts surveyed by First Call/Thomson Financial had
expected earnings of 9 cents per share.
Yahoo! earnings reports often are eagerly awaited because the
company has consistently outperformed expectations. But in recent
days, investors have focused even more attention on Yahoo! because
it is one of the few "blue-chip" Internet firms that have turned
The earnings report may also serve as a bellwether for the
Internet industry, despite stock volatility and predictions that
the weakest e-companies are in trouble.
Yahoo! chief executive Tim Koogle suggested Wednesday in a
conference call to analysts that a shakeout in the Internet
industry has begun that will lead to business failures. For Yahoo!,
that may translate to buying opportunities and expansion
"The high rate of new company formation has led to an
environment in which consolidation is a natural outcome, and that
already is underway," Koogle said. "The strong do grow
Yahoo!'s net revenues rose 120 percent to $228.4 million, from
$103.9 million, as its overseas audience, particularly in Japan,
continued a sharp gain.
The company reported a record 625 million page views per day on
average during March, compared to an average of 465 million page
views per day in December 1999. The number of registered users
worldwide reached 125 million in March, the company reported.
Analysts said Yahoo!'s continuing success stemmed from moves to
extend its reach into nearly all segments of the Internet,
including business-to-business, business-to-consumer, financial
services and wireless. Advertisers and merchants pay companies like
Yahoo! more because of their larger audience.
Because of the increased advertising revenues, Yahoo! increased
its estimate of its future operating profit margin from 32 percent
to 38 percent.
"This is a very high level of profitability that would be the
envy of most companies," said Gary Valenzuela, the company's chief
Separately, the company announced Valenzuela planned to retire
in July and would be succeeded by Susan L. Decker, a research
analyst at Donaldson, Lufkin & Jenrette.