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Overture Beats Second-Quarter Views

But the company says traffic acquisition costs continue to rise.
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, the pay-for-placement Internet search engine that agreed last week to merge with



, posted stronger-than-expected second-quarter results Wednesday.

For the quarter ended June 30, Overture posted net income of $7.6 million, or 12 cents a share, on revenue of $265 million. A year ago the company earned $17.5 million, or 29 cents a share, on revenue of $153 million. Wall Street analysts surveyed by Thomson First Call had forecast a 6-cent profit on revenue of $246 million.

"As we move toward our merger with Yahoo!, our business continues to demonstrate strong operating momentum," said Ted Meisel, Overture's president and chief executive. "Our second quarter results provide clear evidence that we continue to drive the core business while rapidly transforming Overture from a one-product company to a multi-product enterprise operating successfully on a global scale."

Overture declined to provide full-year guidance but said that Wall Street's third-quarter earnings estimate of 7 cents a share is at the high end of Overture's range. Overture said it expects to incur a full quarter of costs related to its Web search product, and that it will also take a hit from preparing for the Yahoo! deal.

Profitable and fast-growing, Overture has been one of the Internet's success stories. But investors have grown increasingly concerned over the last year about the company's so-called traffic acquisition costs, or the amount of revenue Overture shares with big Internet partners such as Yahoo! and


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. It was the worry about these costs, along the prospect of increasing competition from closely held Google, that was widely assumed to have driven Overture into Yahoo!'s arms. Indeed, Overture noted in Wednesday's release that rising traffic-acquisition costs would be among the factors hurting third-quarter earnings.

After rising 51 cents during regular trading Wednesday, Overture shares added 15 cents after the market closed to hit $24.30.