Ask Jeeves Sags on Shortfall

The stock drops 16% after the company warns of a fourth-quarter sales slowdown.
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Updated from Oct. 27

Ask Jeeves

(ASKJ)

was sharply lower Thursday after the search-engine outfit posted numbers that failed to excite Wall Street.

The Emeryville, Calif., company posted third-quarter numbers Wednesday that met analysts' expectations and provided 2005 guidance that was largely in line with estimates. But shares in the search-engine operator plunged 22% in premarket action after the company guided to weaker-than-expected fourth-quarter sales.

The shortfall comes at a time of high hopes for the search engine business. Bullish analysts only raised their growth targets in the wake of strong quarters this month at

Google

(GOOG) - Get Report

and

Yahoo!

(YHOO)

. But Ask Jeeves' guidance failed to meet Wall Street's newly raised bar.

For the third quarter ended Sept. 30, Ask Jeeves reported income from continuing operations of $10.7 million, or 15 cents per share, up from 7 cents per share a year earlier. Pro forma earnings from continuing operations were $17.6 million, or 25 cents per share. That's up from 9 cents a year earlier and in line with the Thomson First Call consensus.

Revenue of $75.7 million, up from $27.2 million in the third quarter of 2003, beat the $75 million forecast.

But the future looks less bright, going by investors' expectations. For the fourth quarter, Ask Jeeves predicts it will match the First Call consensus of 32 cents a share in earnings, but will fall short of the expected $88 million in sales by $2 million.

Looking ahead to next year, Ask Jeeves says it expects pro forma earnings in the range of $1.30 to $1.45 per share, compared with analysts' prior expectations of $1.41. Revenue will be somewhere between $365 million to $395 million, says the company, which makes the current estimate of $389 million look a tad high.

On Instinet, Ask Jeeves was recently down $7.84 to $27.15, although the stock remains up 50% for the year. Other search companies were mixed, with

Yahoo!

(YHOO)

down 39 cents to $35.79 and

Google

(GOOG) - Get Report

adding 14 cents to $186.23.