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April 7, 2004

Dropping Google no drawback in Yahoo’s big Q1

Yahoo! Inc gave internet investors a nice surprise yesterday, reporting better than expected revenue and earnings and huge growth for a quarter in which it overhauled the search business that now makes up the largest part of its business.

By CBR Staff Writer

A smiling (he said) CEO Terry Semel announced first-quarter earnings that more than doubled, up 114% on last year to $101m, and revenue up 167% at $758m. Earnings per share of $0.14 beat the reported analysts’ consensus estimate by three cents.

This is by far the most successful quarter in Yahoo’s history, Semel said. Excluding traffic acquisition costs (TAC), the percentage of clickthrough fees it pays to Overture’s partners, net revenue was up 94% at $550m.

Nowadays, most of Yahoo’s revenue comes from marketing services, mainly the paid click fees it gets from advertisers who use the Overture sponsored search listings service. This segment was up 235% to $635m in the first quarter.

The company said that the organic growth in this revenue segment, excluding the impact of acquisitions including Overture, was 48% and primarily in the search and marketplace properties.

Yahoo apparently felt no immediate ill effects of swapping out Google for a homegrown search engine based on the old Inktomi search engine. That change came about halfway through the first quarter, and Semel said that search will become more important.

We will continue to expand search to all areas of Yahoo, and will focus increasingly on personalization, he said during a conference call yesterday. It’s become accepted over the last few years that search is the best place to present surfers with ads.

On the back of the good first-quarter growth, Yahoo raised its projections for the rest of the year, and announced it would try to make its shares cheaper for investors by executing a 2-for-1 reverse stock split.

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The company now expects full 2004 revenue, excluding TAC, to come in between $2.4bn and $2.52bn, higher than the January estimate of $2.12bn to $2.25bn. The firm did not provide a net income estimate.

This article is based on material originally published by ComputerWire

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