SAN FRANCISCO, Apr 19: Yahoo Inc. on Tuesday posted quarterly results in line with Wall Street expectations on strong display advertising and surprise growth in its Web search audience, sending shares up 6 percent.
Yahoo forecast second-quarter revenue behind some Wall Street estimates but stood by its target for the full year.
Analysts saw the results as good news in the company's battle with its main rival, Google Inc., which leads in paid search advertising while Yahoo leads in graphical, or display advertising, such as online banners.
''The display advertising business is holding up strong and Yahoo is benefiting,'' said Hoefer&Arnett analyst Martin Pyykkonen. ''It is offsetting some of the negative impact of Google having gained some in paid market share.'' Reflecting the impact of higher stock compensation costs, Yahoo said net income for the first quarter fell to $160 million, or 11 cents per diluted share, from $204.6 million, or 14 cents per diluted share, a year earlier.
Net earnings per share were in line with the Wall Street consensus.
Gross revenue rose 34 percent to $1.57 billion. Excluding traffic acquisition costs, revenue rose to $1.09 billion, just ahead of the consensus. Traffic acquisition refers to the cut affiliated Web sites take out of Yahoo revenue for running Yahoo advertising on their own sites.
USERS INCREASING The company said its monthly audience of users rose 27 percent to 402 million, excluding Japan and China, where Yahoo holds minority stakes. Including them, Yahoo's global audience exceeded half a billion.
''One of every two Internet users around the world is using a Yahoo service each month,'' Chairman and Chief Executive Terry Semel said of services ranging from e-mail and instant messaging to music, travel and news.
''Yahoo is really off to a good start in 2006,'' he told investors on a conference call Yahoo Chief Financial Officer Susan Decker said the volume of search queries grew 15 percent to 20 percent in the United States, a rare disclosure by the company, which showed it is holding up against Google's challenge.
Smaller data samples released in recent weeks from market research firms depicted Yahoo's market share in search dipping last quarter as rival Google Inc. gained.
Yahoo, the world's largest Internet media company, said it is due to begin testing shortly an upgraded search advertising service, helping it to more effectively compete with Google.
Executives reaffirmed that the new service would be available widely to advertisers in the second half of 2006 and that it expects to see meaningful revenue starting in 2007.
Decker also said Yahoo expected second-quarter net revenue, excluding customer acquisition costs, of $1.08 billion to $1.16 billion, while analysts were looking for the current quarter's revenue to range between $1.09 billion to $1.19 billion.
Decker also reaffirmed Yahoo's 2006 revenue outlook of $4.60 billion to $4.85 billion. The Wall Street consensus is for $4.76 billion revenue.
Shares of Yahoo jumped 6.1 percent to $33.22 in after-hours trade, up from its closing price in the regular Nasdaq session of $31.30.
Shares of Google rose 2.9 percent to $415.80 in after-hours trade on the back of Yahoo's report. Other top Internet companies such as eBay Inc., IAC/InterActiveCorp and Amazon.com rose by lesser percentages in late trade.
As of Friday, Yahoo's stock traded at 32 times expected 2007 earnings, compared with the 34 times multiple that Google trades at relative to 2007 forecasts, according to broker Piper Jaffray.
Yahoo has lost 20 percent of its value since the start of the year. By contrast Google, which fell a similar percentage after disappointing results three months ago, has subsequently recovered and now trades roughly flat relative to the end of 2005.