Tuesday, September 19, 2006

The New York Times



September 19, 2006

Yahoo Says Ad Growth Is Slowing; Stock Dives

Shares of Yahoo fell more than 11 percent today after the company disclosed that it had sold less advertising in the last few weeks than it expected, largely because of a slowdown in automobile and financial advertising.

Speaking to a conference held in New York by Goldman Sachs, Terry S. Semel, Yahoo’s chief executive, said that while advertising continued to grow from these industries, “they’re not growing as quickly as we might have hoped at this point in time.”

Yahoo said that it would still meet its financial targets for the third quarter, but that its profit and revenue will be toward the bottom of the range it had estimated. In July, the company said it expected third-quarter revenue — excluding payments to companies that display its ads — of $1.115 billion to $1.225 billion, and operating cash flow of $445 million to $505 million. The bottom of that range represents a 20 percent growth in revenue and a 16 percent growth on operating cash flow.

That would represent a further slowing of Yahoo’s growth. In the second quarter its revenue grew by 28 percent. And that result was lower than analysts expected, causing the company’s shares to slide. Over the summer, Yahoo’s stock had regained all of that loss until today’s disclosure.

Yahoo’s shares dropped $3.25, or 11.2 percent, to close at $25.75 in Nasdaq trading.

Investors worried that Yahoo’s problems would affect other Internet companies fell as well. Shares of Google, the largest seller of online advertising, fell $10.88, or 2.6 percent, to $403.81. Shares in Aquantive, a large interactive advertising firm, fell $1.23, or 5 percent, to $23.37.

Still, Wall Street analysts said it appeared that Yahoo’s problems were not widespread in the industry.

“Not everything is hunky-dory in Yahoo land,” said Jordan Rohan, an analyst with RBC Capital Markets. “Yahoo’s audience is not growing as fast as it once did.” Mr. Rohan added that Yahoo appeared to have unusual turnover among its executives and that this might have hurt its ability to sell advertising.

Susan Decker, Yahoo’s chief financial officer, told the investors that the advertising slowdown affected both text-based search advertising and graphical display advertising, an area in which Yahoo is the leader.

A Yahoo spokeswoman said neither Mr. Semel, Ms. Decker nor any other Yahoo executives would have any additional public comments this afternoon.