This article was amended at 6:25 p.m., Oct. 29.
The adage "Ask, and it will be given to you" was not followed in Ask Jeeves'
Some of the numbers the firm did release were not too hot either, and investors showed their displeasure today by sending shares down nearly 25%. Search queries were down 14% from the second quarter, and the key RPQ (revenue per thousand queries) metric was forecast to decline in the fourth quarter versus the prior fourth quarter. The company cited seasonality as the reason for this, emphasizing that search queries were up 41% year over year (including the Interactive Search Holdings acquisition). The industry typically sees a 5% to 10% increase in RPQ quarter over quarter, so that's a concern here. It remains to be seen whether these declines reflect a cyclical business or point to a loss of market share.
Another unappealing number was the percentage of revenue from the relationship with Google
Paid search is booming, and Ask Jeeves has shown excellent growth, with 2004 revenue and EPS growth projected at 145% and 160%, respectively. The company certainly has a wealth of technology, but this is easily said of competitors as well. While its valuation may be attractive compared with Google's astronomical valuation, prospects of slowing growth or maybe even market share loss mean it may not be such a bargain after all. Those interested should listen to the Q&A portion of the conference call and see if they are satisfied with the answers -- today's tumbling in price shows that many investors are not.
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Fool contributor Tim Goh does not own any stake in the companies mentioned.