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Yahoo 1Q Earnings Zoom; Company Plans Stock Split

Thanks to a surge in advertising, the company earned more in the first quarter than at any full year during the dot-com boom.
SAN FRANCISCO (AP) -- Yahoo! Inc. earned more money in the first quarter than it did during any year of the dot-com boom, leading the company to raise its 2004 financial projections and announce plans to split its rapidly rising stock.

The company said Wednesday it earned $101 million, 14 cents per share, compared with $46.7 million, 8 cents per share, at the same time last year.

The first-quarter results, propelled by advertisers eager to have their products promoted on the Internet's most popular destination, surpassed the company's best year before the crash--a $71 million profit in 2000.

"Our impressive performance shows our company has really hit its stride," Yahoo Chairman Terry Semel told analysts during a conference call Wednesday. Semel, a former movie studio boss, lifted Yahoo out of the dot-com doldrums after the company hired him nearly three years ago.

The recent earnings spurt has turned Yahoo's stock into a hot commodity again, tripling the company's market value since the end of 2002, although the shares still remain far below their 2000 peak of $237.50, closing at $48.35 on the Nasdaq Stock Market before the earnings were released.

Encouraged by its recent success, Yahoo announced a two-for-one stock split, effective May 11.

Management also brightened its outlook, projecting 2004 revenue of $2.4 billion to $2.5 billion, excluding the money that Overture pays other Web sites. The mean analyst estimate had been $2.24 billion, according to Thomson First Call.

The first-quarter results topped the mean estimate of 11 cents per share among analysts polled by Thomson First Call.

Revenue for the three months ended in March reached $758 million, up from $283 million last year.

Sunnyvale, Calif.-based Yahoo generated much of the revenue gain from its recent $1.8 billion acquisition of Overture Services, which makes money distributing advertising links based on requests entered into online search engines.

Overture shares some of its revenue when the requests are made through search engines besides Yahoo's. If that cost had been subtracted, Yahoo said this year's first-quarter revenue would have been $550 million.

Yahoo has been cashing in on the popularity of its Web site to attract more advertisers and introduce more fees for its services.

Those trends continued in the first quarter. The company's marketing revenue totaled $635 million, more than tripling the $190 million collected at the same time last year.

First-quarter subscriptions totaled $88 million, a 39 percent improvement from $64 million last year. At the end of March, Yahoo had 5.8 million subscribers, doubling the total of 2.9 million in the prior year. By the end of this year, Yahoo expects to have 7.5 million to 8 million subscribers, said Susan Decker, the company's chief financial officer.

As people spend more time surfing the Web and less time watching TV, advertisers are expected to spend even more money on the Internet--a trend that bodes well for Yahoo, which had 274 million registered users at the end of March. The company hopes to broaden its appeal even more by launching its own television advertising campaign Thursday.

Online advertising worldwide is expected to approach $11 billion this year, up from $9.4 billion last year, according to eMarketer, a New York research firm. In 2003, Yahoo attracted nearly 13 percent of online ad spending worldwide.

"Yahoo has been in a sweet spot in terms of Internet advertising for a while, and that spot just got a lot sweeter," said American Technology Research analyst Mark Mahaney.