It doesn't look like Getty gets any respect.

Getty Images


, the world's largest for-profit library of photos and other images, appears to be making good on its promise to use the Internet to boost sales and cut expenses. But despite reporting strong first-quarter results Wednesday morning -- strong enough to confound one prominent skeptic of the company -- the market punished the B2B play along with the rest of the tech sector.

For the quarter ended March 31, Getty reported a loss of 46 cents a share, slightly narrower than the

First Call

range. But the real action was in the company's revenue growth. The brokerages that follow the company, including

Morgan Stanley Dean Witter


Robertson Stephens

, had published revenue estimates for the quarter, topping out at $85 million, up from $52.2 million a year earlier. Instead, Getty, which sells primarily stock photography, or photographs that weren't shot on assignment for the company that ends up using them, reported revenue of $104.8 million.

"I'm bearish on them and I'm bearish on the industry," says Jim Pickerell, a stock-photo veteran who has edited the trade newsletter,

Selling Stock

, for the past decade. "But they certainly are showing numbers that are very strong right now."

Investors weren't thrilled, though, perhaps because of Getty's announcement, along with its results, that Chief Financial Officer Chris Roling was leaving to become CFO of the privately held Seattle-based Internet company


. On Wednesday afternoon, Getty's shares fell more than 10%, to 29 3/16.

Lowball Glass

Granted, Getty's revenue growth isn't quite as impressive as it appears at first glance, because included in the $104.8 million are a full quarter's results from rival

The Image Bank

, which the acquisitive Getty snapped up last November, and

Visual Communications Group

, which Getty acquired a week before the first quarter's close.

If one subtracts Visual Communications' contribution to the first quarter and Image Bank's revenue contributions over the past two quarters (using numbers supplied by Getty and an estimate from Pickerell), it becomes apparent that $85 million was a lowball estimate. Even if the company's core business had stayed flat from the fourth quarter to the first quarter -- and Pickerell says the stock business no longer fluctuates seasonally -- Getty would have reported $95.5 million in revenue, well ahead of the $85 million estimate.

Getty CEO Jonathan Klein acknowledges that, like other publicly traded firms, Getty discusses its finances with analysts who are trying to set earnings estimates for the company. But he denies that the company misled investors with the guidance that might have led to the analysts' estimates. "In this particular quarter, Getty Images exceeded its own expectations," he says.

In any case, by coming in at $104.8 million, Getty's pre-existing business grew 13% from fourth quarter to first quarter. "I'm totally surprised by that number," says Pickerell, who calls the growth "fantastic" given his belief that stock photo sales are declining industry-wide. "Getty could definitely be taking market share from everybody else," he says.

Solid to the Core

Klein attributes the company's success to its core strategy, outlined in an

article published here in March, of taking the stock photography business -- which has traditionally involved pulling photos and transparencies out of filing cabinets and sending them to clients -- out of the physical world as much as possible and onto the Internet. Leading with its




brands, the company is trying to convert as much of its business as possible into one in which photo purchases are transacted over the Internet and images are delivered over the Internet, too.

In addition to building sales, going online is helping the company cut costs, says Klein. "If there was a business that was made for the Internet ... it was the intellectual-property business," he says.

And for now, Pickerell grudgingly agrees. In the long run, he says, he doesn't believe that the lower prices that Getty ends up charging for its photos will be offset by a higher volume of sales. "But," he says, "it seems to be working for Getty."