Internet bellwether Yahoo posted this week net income for the fourth quarter that rose from a year ago but was below analyst expectations, sending shares down about 13 percent in after-hours trade.
Net income for the period ended Dec. 31 was US$247 million, or 16 cents per share, compared with US$187 million, or 13 cents a share, a year ago. The income was adjusted to exclude a one-time gain from Yahoo's purchase of a 40 percent stake in Chinese e-commerce site Alibaba.com.
Analysts polled by Thomson Financial had expected Yahoo to post fourth-quarter earnings per share of 17 cents.
The news sent Yahoo shares tumbling more than 13 percent in after-hours trading. After closing at US$40.11 in regular trading, the shares slid to US$34.96 after the earnings report was released.
Revenue was US$1.5 billion, up 39 percent from US$1.078 billion a year ago. Revenue excluding traffic acquisition costs, or fees shared with partners, was US$1.068 billion, roughly in line with analyst expectations and up 36 percent from US$785 million a year ago.
Yahoo met its internal guidance and gained market share against other portal rivals, including Google and MSN, said Dan Rosensweig, chief operating officer.
"We are the largest Internet network in the world, with the largest number of users and the most-engaged users. We're seeing growth in all our product categories," he said in an interview with CNET News.com. "Nearly 40 percent of everybody who came onto the Internet last quarter touched Yahoo some how. We think we're in a terrific position."
Yahoo has 429 million unique users, more than 200 million active users and 12.6 million unique paid relationships with users who subscribe to online music and other services, Chief Executive Terry Semel said in a teleconference with analysts. "This year we are poised to surpass 15 million paying relationships," he said.
Marketing services revenue was US$1.32 billion, up 39 percent from US$943 million a year ago, while fees from premium services revenue rose 38 percent to US$186 million from US$135 million, Yahoo said.
For the full year, net income was US$854 million, or 58 cents a share, compared with US$525 million, or 36 cents a share, for 2004. Revenue was US$5.3 billion, up 47 percent from US$3.6 billion, while revenue excluding traffic acquisition costs was US$3.7 billion, up 42 percent from US$2.6 billion.
The company expects first-quarter revenue, excluding traffic acquisition costs, to fall in the range of US$1.04 billion to US$1.1 billion and 2006 revenue to be in the range of US$4.6 billion to US$4.85 billion, Chief Financial Officer Susan Decker said during the teleconference. Analysts on average were estimating that first-quarter revenue would be US$1.09 billion for the first quarter and US$4.77 billion for the full year.
In 2006, Yahoo expects to lose about US$120 million in ad revenue from affiliates, mostly due to Microsoft's MSN planned move to its own ad network in June, Decker said. MSN's revenue contribution is expected to drop from US$75 million to US$25 million for the first half of 2006, she said.
Yahoo's headcount was up 30 percent from a year ago to 9,820, Decker said.
During the fourth quarter, Yahoo's estimated advertising revenue from image-based ads jumped 62 percent from a year ago. Overall traffic across its Web sites grew 9 percent to 103.5 million users, reaching about 68 percent of the Web's active users, according to research firm Nielsen/NetRatings.
Yahoo shares have risen about 8 percent in the past year and nearly 20 percent since its last earnings announcement.
Google reports its fourth-quarter results Jan. 31.
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