Yahoo! reports profits double, but stock plunges

SAN FRANCISCO — Yahoo! Inc.'s second-quarter profit more than doubled as the Internet giant continued riding online advertising's rising wave, but the results still disappointed investors hoping for even more.

The company, based in Sunnyvale, Calif., said Wednesday that it earned $112.5 million, or 8 cents per share, up from $50.8 million, or 4 cents per share, at the same time last year.

Revenue for the three months ended June totaled $832.3 million compared with $321.4 million last year.

The earnings matched the mean estimate among analysts surveyed by Thomson First Call.

In recent quarters, Yahoo has consistently beat analyst expectations, so simply hitting Wall Street's earnings target represented a letdown. Management also raised its revenue outlook less aggressively than in recent quarters.

The company projects its revenue this year will range from $2.46 billion to $2.54 billion, only slightly above an estimate of $2.41 billion to $2.52 billion made three months ago. Those revenue estimates exclude the money Yahoo pays other Web sites in its advertising network.

After declining 62 cents to close at $32.60 on the Nasdaq Stock Market, Yahoo's shares tumbled by $3.80, or 11.6 percent, in heavy after-hours trading. Yahoo released its results after the stock market closed.

Buoyed by the company's swelling profits, Yahoo's stock has nearly quadrupled since the end of 2002.

The company's comeback from the dot-com doldrums has been powered by steady advertising growth as businesses sought to capitalize on the popularity of Yahoo's Web site — the most popular destination on the Internet.

That trend continued in the latest quarter. The company's marketing revenue totaled $691 million, more than tripling from $219 million last year. The gains largely reflected Yahoo's $1.8 billion acquisition of Overture Services Inc., which makes money distributing advertising links based on requests entered into online search engines.

"When marketers think of the Internet, more than ever they are thinking of Yahoo," CEO Terry Semel said Wednesday during a conference call with analysts.

Yahoo also continued to attract more subscribers who pay the company for Internet access, expanded e-mail and online matchmaking services. Yahoo ended June with 6.4 million subscribers, up from 5.8 million at the end of March.

Despite the company's recent success, industry analysts have become increasingly worried that Yahoo's stock has become too pricey, especially as formidable rivals develop more competitive products.

Online search engine leader Google Inc. is testing a free e-mail service offering expanded storage, prompting Yahoo to increase the amount of storage that it offers through its free e-mail service. That move is expected to decrease the number of people willing to subscribe to Yahoo's premium e-mail service.