The Telegraph
Since 1st March, 1999
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Yahoo looks beyond US

New York, Jan. 16: Buoyed by its growing sales and profits, Yahoo is planning to take its high-speed internet access service across the US. On Wednesday, the big Internet portal announced better-than-expected financial results for the fourth quarter of 2002.

It was able to expand its sales of online advertising, even as it added new services for which users pay monthly fees. One of the fastest growing of those services is high-speed, or broadband, internet access, which Yahoo now offers as a co-branded service with SBC Communications, the phone company that serves about one-third of the nation.

Overall, Yahoo earned $ 46.2 million for the quarter, compared with a loss of $ 8.7 million a year ago.

Last year, however, Yahoo had to write off some acquisition-related costs that are no longer required. If current accounting rules prevailed, it would have had a profit of $ 6.8 million in the fourth quarter of 2001.

Yahoo’s profit comes to 8 cents a share, better than the 6 cents analysts expected. The company posted sales of $ 285.8 million, up 51 per cent from a year earlier. Excluding HotJobs, an employment site that Yahoo acquired early last year, its sales would have risen by 31 per cent.

Fee-based services were the fastest growing area for Yahoo. It said it had a combined total of 2.2 million subscribers for its broadband service, a dial-up Internet service also with SBC, its rapidly growing online personals service and a range of other smaller offerings. That is up from 3,75,000 subscribers a year ago.

Revenue from those services, which also includes the HotJobs site it acquired last January, were $ 9.4 million. Excluding HotJobs, that represented a 65 per cent increase.

“Sometime this year, if you are a Yahoo user, you will have the ability to be part of Yahoo broadband all over the country,” Terry Semel, Yahoo’s chief executive, said in an interview on Wednesday.

In particular, he said that cable companies, which until now have tried to promote their own broadband services, are now preparing to open their networks to a variety of offerings. Yahoo, he said, will compete with America Online, Microsoft, and EarthLink in providing broadband services over cable.

Semel said Yahoo would detail its broadband strategy at a meeting with investors next month. Safa Rashtchy, an analyst with US Bancorp Piper Jaffray, said that such deals had the potential to be significant for Yahoo. “SBC hasn’t produced a lot of revenue for Yahoo yet, but we estimate it will be $ 100 million this year,” he said. “If they get the other two-thirds of the country, that could be $ 300 million a year.”

Online advertising, which is plummeting at rivals like America Online, also performed well for Yahoo. Its advertising sales rose by 31 per cent to $ 177.5, largely as a result of sales of text advertising on its search pages and other advertising products for small businesses. Yahoo also boasted that it had also been able to create big animated ad formats that are increasingly appealing to big national advertisers. In a conference call with investors, Semel said that Yahoo had recently expanded its sales to the Gap and General Motors, among others.

A big priority for this year, he said, was advertising related to Web searches, Yahoo’s original service. Largely as a result of its deal to incorporate paid listings from Overture Services, its revenue from search advertising was $ 120 million last year, about 20 per cent of its total. Yahoo is hoping to increase this by putting search-related advertising on other areas of its site. And last month, it agreed to buy Intkomi, a maker of search software, to help its search service win back users who have defected to Google.

Semel said the company expected its overall advertising sales to grow by at least 20 per cent this year. Yahoo’s advertising sales rose in each quarter of last year, but the company has yet to reach the heights of its business in the dot-com boom. For all of last year, Yahoo’s sales were $ 953 million — up from $717 million in 2001, but below the $ 1.1 billion of 2000.

Yahoo on Wednesday increased its guidance for financial results this year. It now expects to post revenue of $ 1.145 to $ 1.215 billion for the year, besting its record. Semel said that the company is confident of this sales increase of 20 per cent to 27 per cent, even if the economy and the advertising environment does not improve. Moreover, he said, the company can grow while keeping a tight lid on costs. As a result, it expects its earnings before income tax, depreciation and amortisation, a measure of cash flow popular with media companies, to increase by 43 per cent to 60 per cent this year. The equivalent figure for last year was $ 206 million.

Yahoo reported that its user base continued to grow briskly. Its audience worldwide, excluding Japan, was 213 million people in December, up from 188 million a year earlier. Semel said that this user base, most of whom buy Internet access from America Online, Microsoft’s MSN and others, creates the best opportunity for Yahoo’s expanding broadband offering. “Every time a Yahoo user comes in contact with Yahoo, we can talk about our own broadband service,” he said.

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