Yahoo exceeds Q3 expectations

IDG News Service - Web portal Yahoo Inc. topped Wall Street's earnings and revenue expectations for its third quarter, which ended Sept. 30.
The Sunnyvale, Calif.-based company posted net revenue of $356.8 million and net income of $65.3 million, or 10 cents per share, it said yesterday in a statement (download PDF). Consensus expectations from analysts polled by Thomson Financial/First Call were for revenue of $337 million and earnings of 9 cents per share.
Yahoo issued its earnings statement after the close of the financial markets. Compared with 2002's third quarter, net revenue grew 43%, while net income more than doubled from $28.9 million. The company had earnings per share of 5 cents in last year's third quarter.
"Our performance is due to our success at fully exploiting the revenue potential in both of our core businesses -- our marketing solutions platform and our consumer services platform -- resulting in a growing, sustainable and balanced revenue model," Terry Semel, Yahoo's chairman and CEO, said in a conference call to discuss the quarter's results.
Yahoo's audience, meanwhile, grew to about 245 million unique users during the quarter, up from 201 million in 2002's third quarter and from 236 million in this year's second quarter.
Among those 245 million unique users, there were about 123 million active registered users, up from 93 million in 2002's third quarter and 116 million in this year's preceding quarter. An active registered user is one who has registered with Yahoo for services such as e-mail service or participation in a group.
This is the first time active registered users have made up more than 50% of the total user base, Semel said. "This is a very significant milestone, demonstrating our success in building deeper consumer relationships," he said.
Active registered users consume twice as many services as users who aren't registered and stay four times longer on the Yahoo network, making them good prospects for becoming paying subscribers of a fee-based Yahoo service, such as DSL Internet access, small-business services, premium mail service or personal ads, Semel said.
Yahoo ended the third quarter with about 4.2 million unique paying users, up from 1.5 million in 2002's third quarter and 3.5 million in this year's previous quarter, Semel said.
A key factor in Yahoo's ability to increase its paying users in the future will be the use of broadband connections, because users with a high-speed connection spend more time online, use and buy more products and services, and are more attractive to advertisers. "These characteristics of broadband users dramatically affect both of our core businesses," he said.
Along these lines, Semel said the company's partnership with telecommunications provider SBC Communications Inc. to offer a bundle of DSL service and Yahoo content is going very well. A more recent and similar partnership with British Telecommunications PLC in the U.K. has gotten off to a good start as well. "It is very early, but BT has already seen a significant uplift in new DSL sales," he said.
Growth in online advertising is now outpacing the growth in the overall advertising industry, and Yahoo's ad business is large and growing, he said. "With online advertising on the move, Yahoo is one of the best-positioned global companies to take advantage of the upswing," he said.
Yahoo also increased its outlook for the full year.

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