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SAN FRANCISCO - Yahoo today reported an 11 per cent fall in first-quarter profit, missing Wall Street estimates as a new advertising system aimed at clawing back market share from Google has yet to take hold.
Shares of the internet media company fell 8 per cent in extended trade as Yahoo forecast second-quarter net revenue of US$1.2 billion ($1.6 billion) to US$1.3 billion, compared with analyst forecasts ranging from US$1.22 billion to US$1.35 billion.
Analysts said Yahoo was unlikely anytime soon to close a widening market share gap in Web search with leader Google Inc.
"We know there is still much more to do and room for more continued growth across our business," Chairman and Chief Executive Terry Semel told investors on a conference call following the report.
Stifel Nicolaus analyst Scott Devitt said it looked like the impact from Yahoo's new Web advertising system, dubbed Panama, has been slower to materialize than investors hoped.
"It looks like they lowered the second quarter (forecast) a little bit," he added. "We would be buying Google on these results. I think it's a market share issue, not a sector issue."
Yahoo's share of the US Web search audience has continued to slip to 27.5 per cent of the market, while Google posted fresh gains, to 48.3 per cent, according to audience data from comScore Inc. The gap has been widening for a year and a half.
Yahoo said first-quarter net income fell to US$142 million, or 10 cents per diluted share, from the year-earlier quarter's US$160 million, or 11 cents per diluted share.
Wall Street analysts, on average, had expected a profit of 11 cents per share, according to Reuters Estimates.
Revenue rose 9 per cent to US$1.18 billion, excluding traffic acquisition costs -- the revenue cut Yahoo passes back to affiliated websites that run its advertising. International revenue grew 15 per cent while US sales rose only 7 per cent.
Yahoo derives a major chunk of its revenue from selling display advertising -- banner ads and the like -- to corporate brand marketers. Semel said this business should grow in line with the overall display ad market, which analysts estimate will increase about 20 per cent during 2007.
The company had previously cautioned that the first quarter would be the slowest-growing period of the current year.
- REUTERS
