Yahoo Profits Jump - But Investors say 'Higher'

19 January 2006

Despite fourth quarter earnings soaring 83%, shares in internal portal giant Yahoo! plunged on Tuesday because the numbers failed to live up to analysts' expectations.

The California-headquartered business unveiled Q4 profits of $683 million (€563m; £386m) on £1.5 billion revenues, thanks to strong online advertising sales and a one-off gain via a 40% stake in Chinese firm

But a failure to meet Wall Street profits forecasts of 47 cents a share by just one point pushed stock values down 13%. Analysts believe the results could have a knock-on effect on the wider internet sector.

This is the second consecutive quarter that Yahoo has reported robust financial growth only to have investors punish its stock.

The web's most heavily trafficked destination also said its reported revenue growth would slow this year and profit margins would slip due to several one-off factors. These include the restructuring of its business in China and the loss of highly profitable business from MSN.

Ceo Terry Semel has outlined planned changes to Yahoo's search business which he hopes will narrow the gap with main competitor Google. So far, however, Yahoo has failed to find a formula to rival Google's moneymaking search ads.

Semel says the internet advertising market is still in the early stages of a "significant platform shift", and that "now is the time to make new investments" to assemble a global audience to capitalize on the shift.

Data sourced from Financial Times Online; additional content by WARC staff