Bad Timing For Yahoo!

Updated from 8:33 a.m. EST

An unspectacular performance at Yahoo! (YHOO Quote) came at a bad time, as investors bailed out of the stock amid the panic sown by Intel's(INTC Quote) misery-inducing quarter.

Shares of the Internet titan lost as much as 13% after hours, erasing a four-month rally, as investors chose not to split hairs in the wake of a mediocre quarter and Intel's big miss. The stock recently traded down $4.90, or 12.2%, to $35.21. Rival Google(GOOG Quote), which was cut to sell in the wake of Yahoo!'s report at research outfit Stifel, lost $15.91, or 3.5%, to $451.20.

After the bell Tuesday, Yahoo! said fourth-quarter earnings rose 83% to $684 million, or 46 cents a share, while adjusted earnings rose 32% to $247 million, or 16 cents a share. The latter number was either in line with analyst forecasts or a penny shy, depending on which estimate compiler used.

Revenue rose 39% from a year ago to $1.5 billion on a gross basis and gained 36% from a year ago on a so-called net basis, reflecting payments made to the company's search partners, to $1.07 billion. That also matched estimates. Marketing services revenue rose 39% from a year ago to a gross $1.32 billion, while fees revenue rose 38% on a gross basis to $186 million.

"There is nothing there that is a particular problem," says Martin Pyykkonnen, an analyst with Hoefer & Arnett who rates the shares strong buy and doesn't own them. "It's about beating expectations and coming out ahead, and they didn't do that."

In a postclose conference call, Yahoo! execs unveiled uninspiring guidance. The company guided to net revenue of $1.04 billion to $1.1 billion, which means Yahoo! is likely to miss the $1.09 billion Thomson First Call analyst consensus estimate.

Operating cash flow will be $410 million to $440 million in the first quarter and $1.91 billion to $2.06 billion for the year, Yahoo! said. Free cash flow for the year will be $1.4 billion to $1.6 billion.

For the fourth quarter, free cash flow rose to $330 million from $251 million a year earlier, and Yahoo! generated an added $369 million from the issuance of common stock as a result of the exercise of employee stock options. But cash, cash equivalents and investments in marketable debt securities fell to $4 billion at Dec. 31 from $4.76 billion at Sept. 30 as the company spent $1.5 billion on acquisitions.

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