Yahoo! Fires Back at Google

Updated from 5:25 p.m.

Yahoo! ( YHOO) raised cash-flow guidance at the close of its analyst day Thursday, a day when the company announced an email initiative to compete with that of search rival Google.

Chief financial officer Sue Decker said the company was now targeting an operating cash flow margin in the range of 40% to 45%, up from the 32% to 35% range forecast at last year's meeting.

Earlier in the day, Jim Brock, Yahoo!'s senior vice president for communications and consumer services, told attendees of the San Francisco meeting that Yahoo! would raise the storage limit on free Yahoo! email accounts to 100 megabytes this summer, up from the current maximum of 6 megabytes.

It was all part of a daylong presentation, telecast on the Web, that was designed to highlight such areas as the advertising business, international growth opportunities and the challenges of Internet search engineering. Lurking in the background was Google, the search engine whose recent filing to offer stock to the public has captured much of Wall Street's attention.

But making a point that executives hammered at throughout the day, CEO Terry Semel said, "We all truly believe that we're just starting ... and that the best is yet to come."

Yahoo!, which reported a 37% OCF margin in the first quarter ended March 31, attributed the raising of guidance to its strengthening international operations. As indicated early Thursday, the new 40% target had been predicted by American Technology Research analyst Mark Mahaney.

The email capacity announcement was a clear shot at Google, which is testing an email service that would come with a gigabyte of free storage -- in exchange for the right to sell ads to users based on the content of their email. The hotly anticipated service, which some observers say could hurt Yahoo!'s email business, is called Gmail.

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