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player ready...Q. I am concerned about my shares of Yahoo Inc. and wonder if time has passed the company by.
L.R., via the Internet
A. Powerful Internet rival Google Inc. may have passed it by, but its own long-term viability depends mostly on whether it can improve advertising sales and seize new market opportunities.
Yahoo (YHOO) stock is down 35 percent this year after gaining 4 percent last year, its years of dramatic gains–such as 67 percent in 2004 and 175 percent in 2003–now seemingly behind it.
It needs revenue gains from its new and upgraded search-advertising system called Panama, which Chief Executive Terry Semel believes will provide “meaningful financial benefits.” The first phase, a new ad platform, was pushed back from the third quarter to the fourth. A second phase, which ranks ads using several different criteria, will be available early next year.
Yahoo has one of the most popular sites on the Web, the online advertising industry is setting records and there should be positive e-commerce results during the holiday season. The firm has more than $3 billion in cash and a solid position in online advertising.
Its third-quarter profits, however, declined 37 percent in comparison to Google’s 92 percent increase. Yahoo is closing U.S. offices during the last week of the year to cut costs.
Blame this on competition from not only Google and the YouTube site that Google is purchasing, but Microsoft’s MSN, News Corp.’s MySpace and the Facebook site Yahoo has been in talks to buy.
In the belief the stock has bottomed out, the consensus rating of Yahoo by Wall Street analysts is “buy,” according to Thomson Financial, consisting of six “strong buys,” 24 “buys,” nine “holds” and one “strong sell.”
Yahoo isn’t rolling over and playing dead.
A redesigned home page went live in September. It is delivering online services to Hewlett-Packard Co.’s consumer PCs and offering a Web-based photo sharing service with AT&T.
Yahoo purchased Jumpcut, whose members can create short films using stock footage and their own videos. It is buying a 20 percent stake in Right Media, whose exchange is used to buy and sell online advertising through auction, and is purchasing Fysix, whose product is used to create online ad campaigns. Acquisitions of photo-sharing site Flickr and social bookmarking site Del.icio.us have proven successful.
Earnings are expected to decline 21 percent this year, compared with the 10 percent growth rate forecast for the Internet information provider industry. Next year’s projected 30 percent increase compares to 19 percent expected industrywide. The five-year annualized growth rate forecast is 25 percent versus 13 percent forecast for its peers.
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].