Yahoo! traded up this morning after the company reported double the revenues and triple the pro forma income from the previous year. The company continues to increase its already huge audience, both in the United States and abroad, and shows little sign of being hurt by declining dot-com advertising.
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The company reported second-quarter revenues of $270.1 million, a 110% increase from the previous year and 18% higher than last quarter, as well as $73.9 million in pro forma earnings, triple last year's $27 million and almost 17% higher sequentially. Earnings per share (EPS) were $0.12, compared to the year-ago figure of $0.05.
In addition, the company posted another set of impressive usage numbers. Worldwide unique users reached 156 million for the month of June, a 7.6% increase over March's figure of 145 million. Registered users soared to 155 million, an increase of 24%. Finally, average page views per day increased to 680 million in June, a 9% jump over March's figure of 625 million. These numbers help explain a Media Metrix report in May which found that the company reached 64.5% of the combined U.S. home and work Internet audience. In addition, Yahoo!'s reach is truly global: Yahoo! Japan recorded 20 million unique visitors last month, and Yahoo! Europe averaged 33 million page views per day.
Investors should compare these numbers to those of previous quarters, as listed in Monday's Rule Maker Portfolio earnings preview column. It does appear that sequential growth in some of these metrics is slowing, but the company argues that measures like page views are incomplete, since they do not reflect customers' use of chat, streaming media, and voice services. Yahoo! distributed 13 million hours of streaming media in June, for example, and logged in over 500 million minutes of "voice services."
This quarter's results indicate that concerns over reduced ad spending by dot-coms, which depressed the company's stock price recently and led to a widely reported analyst downgrade on Friday, may have been overblown. Yahoo! reported that advertising customers increased slightly to 3,675, from 3,565 in the previous quarter. In a conference call, the company stated that "financially questionable" clients accounted for less than 10% of its revenue, and that 25% of sales came from business services and international advertising, which does not rely as much on Internet-related clients. In fact, Yahoo! Europe stated that less than 2% of its advertising came from "dot-com companies that we have worries about."
While the company had an impressive quarter, investors should keep in mind that its stock remains richly valued, with a forward P/E of approximately 275 (though its price-to-free cash flow ratio is much lower). Nevertheless, the company remains a leader in the kind of interactive services that will become more widespread as greater numbers of people access the Internet through broadband and wireless services.
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