Yahoo! Slips on Steady Guidance

Updated from Jan. 14

Yahoo! met its match Wednesday in tech investors' rising expectations, and its shares reflected that in premarket trading Thursday

The big Internet media company sailed past Wall Street's targets after the bell, posting fourth-quarter earnings of $75 million, or 11 cents a share, on net revenue of $511 million. But as some observers had cautioned, the company's strong performance wasn't enough to forestall the oft-invoked sell-the-news instinct, and Yahoo! shares fell $1.65, or $3.41%, to $46.74 in early trading Thursday.

It wasn't that the numbers were terribly weak. The Thomson First Call analyst consensus estimate had called for earnings of 11 cents a share on net revenue of $495 million. Net revenue excludes the traffic-acquisition costs, or TAC, that Yahoo! pays online search partners such as Microsoft . A year ago, Yahoo! earned $46 million, or 8 cents a share, on revenue of $286 million.

Looking ahead, Yahoo! gave guidance straddling Wall Street's expectations going into the call. In the first quarter ending March 31, Yahoo! projects revenue, excluding traffic acquisition costs paid by its Overture Services subsidiary, of between $475 million and $505 million. Analysts surveyed by Thomson First Call had been expecting first quarter revenue of $492 million, net of TAC, and earnings per share of 11 cents.

For full-year 2004, Yahoo! forecasts after-TAC revenue in the range of $2.12 billion to $2.25 billion. Analysts had been expecting 2004 revenue of $2.17 billion.

"Yahoo!'s fourth-quarter performance completes a year of phenomenal growth for our company, and represents the most successful quarter in the history of Yahoo!," CEO Terry Semel said in a statement. "Great products equal great business," Semel added on a postclose conference call.

Still, considering the massive appreciation in the already red-hot Internet sector -- where shares of Yahoo! and its blue-chip online peers eBay , Amazon.com and InterActiveCorp have been marching steadily higher for the better part of a year -- the postclose selloff hardly came as a shock. Indeed, some analysts suspected Yahoo! shares could slip following the report if it failed to boost its first-quarter guidance well beyond the consensus.