by CIO Staff

Yahoo Misses Q2 Revenue Target, Delays Ad System

Jul 19, 20063 mins
Consumer Electronics

Yahoo’s second-quarter revenue fell short of Wall Street’s expectations, but the Sunnyvale, Calif., company met the analysts’ earnings-per-share consensus forecast.

Yahoo’s revenue grew 26 percent compared with last year’s second quarter, totaling US$1.58 billion for the period, which ended June 30. Excluding the commissions Yahoo pays to third-party websites that belong to its advertising network, the company had revenue of $1.12 billion, up 28 percent but below the $1.14 billion consensus expectation from analysts polled by Thomson Financial.

Meanwhile, net income came in at $164.3 million, or $0.11 per share, in line with analysts’ expectations. This compares with net income of $754.7 million, or $0.51 per share, in last year’s second quarter, the company announced Tuesday.

The revenue miss wasn’t the only piece of bad news Yahoo delivered. Its highly anticipated new advertising platform, called Project Panama, is delayed and will not go live in the third quarter as previously planned.

Yahoo Chairman and Chief Executive Officer Terry Semel said the company is now shooting for the fourth quarter. Chief Financial Officer Susan Decker said no positive financial effects should be expected from its rollout until next fiscal year, which begins Jan. 1.

“To meet the standards we believe our clients should expect from us, it’s prudent to add some extra time to our original estimates before the commercial launch,” Semel said during a conference call. “This is the right decision to ensure the most successful commercial launch possible.”

Yahoo executives have been loudly touting Project Panama for months, saying the new system will give Yahoo an edge in search-based advertising where it competes head to head with Google and Microsoft. They have also said the system will give a significant boost to the company’s ad sales.

The underlying technology platform is done, but Yahoo is still working with partners so that they can adapt their systems to Project Panama, Semel said. Yahoo is also still conducting quality assurance testing on the new system.

Dan Rosensweig, Yahoo’s chief operating officer, said the Project Panama delay wasn’t caused by technical bugs and glitches, but simply by a realization that more time is needed to properly finish the implementation.

Excluding Yahoo China, Yahoo ended the quarter with 412 million unique users, compared with 321 million in 2005’s second quarter. Of the 412 million, 208 million were active registered users, or users who have signed up for at least one Yahoo service, such as e-mail, and who visit the Yahoo network at least once per month. Active registered users were up from 174 million in 2005’s second quarter.

Among the active registered users, 14.3 million were fee-paying users, defined as those who pay for at least one Yahoo service. This was up from 10.1 million. Daily average page views increased 33 percent to 3.94 billion. Meanwhile, Yahoo finished the quarter with 10,500 employees, up from 8,300 in 2005’s second quarter.

Looking ahead, Yahoo expects revenue, excluding commissions, to be in the range of $1.11 billion to $1.22 billion next quarter, and between $4.60 billion and $4.85 billion for the full fiscal year.

-Juan Carlos Perez, IDG News Service (Miami Bureau)

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