Panama News Warms Yahoo!

Excluding items, the company earned 16 cents a share, beating the Thomson First Call estimate of a 13-cents-a-share profit.

Excluding traffic acquisition costs, revenue was $1.23 billion in the fourth quarter. Yahoo! had forecast sales of $1.14 billion to $1.26 billion. First Call was expecting $1.22 billion.

Excluding traffic acquisition costs, Yahoo! forecast revenue of $1.1 billion to $1.2 billion for the first quarter and $4.95 to $5.45 billion for 2007. The company said it would start seeing financial impact from Panama beginning in the second quarter.

First Call was expecting revenue of $1.26 billion for the first quarter and $5.47 billion for the full year

Investors seem to be more focused on Yahoo!'s ability to execute and get Panama on track than on the company's sluggish guidance. That's because a bet on Yahoo! at this point is more an expression of faith in the company's ability to deliver on its vast, far-reaching network of assets than a move to pick up a battered, bargain stock in the hopes of near-term financial performance.

Despite losing one-third of its value in 2006, Yahoo! is anything but cheap -- it still trades at a forward price-to-earnings ratio of nearly 47, compared with search leader Google's 35.

The key for Yahoo! will be to tie together its media assets in a way that makes it the go-to choice for advertisers. Already the unrivaled market leader in graphical advertising, a segment that recorded a solid showing during the quarter, the company will seek to further its advantage in using its many points of contact with users to cross-sell ads.