Yahoo! stocks take another dive

The Associated Press
Friday March 09, 2001

SAN JOSE — Shares of Yahoo! Inc. plunged nearly 19 percent Thursday after the former dot-com darling warned that it is struggling to turn a profit and is looking for a new chief executive. 

CEO Tim Koogle, who has been with the company almost since it started, will step aside when a replacement is found. He will stay on as chairman. 

Koogle, 49, said he felt Yahoo needed new talent. 

“I’m looking over the horizon and saying, when the economy starts to firm and Yahoo has weathered through this, what do we need to have in place so that we’ve got enough bench strength to scale continuously as we grow for the next five to 10 years?” Koogle said in a conference call with financial analysts. 

The company announced Wednesday that its first-quarter operating earnings will come in at “approximately break-even,” well short of Wall Street’s expectations. Full-year results also could miss targets. 

Shares of Yahoo, which had been halted for most of the day Wednesday on the Nasdaq Stock Market for the release of pending news, fell $3.94 to $17.06 in afternoon trading Thursday. 

“The best dot-com can’t make it, and that’s troubling for the entire Internet economy,” said Jordan Rohan, media analyst for Wit Soundview.  

“If Yahoo is only marginally profitable, then players like Terra Lycos don’t stand a chance. And smaller players aren’t even in the game.” 

After starting as a search engine in the mid-1990s, Santa Clara-based Yahoo grew into a full-service information and shopping portal and at one point was the world’s most popular destination on the Internet. Yahoo also was one of the Internet’s biggest financial success stories, with revenue nearly doubling last year, to $1.1 billion, and profits of $291 million. 

But the company’s dependence on advertising, which accounted for nearly 90 percent of last year’s revenue, has proven problematic in the dot-com meltdown. Also, the overall slowing of the economy has forced companies to slash their spending on marketing. 

“All businesses in the United States are facing challenging economic conditions that have weakened further in recent weeks, and as consumer confidence and spending has deteriorated, a broad range of customers have delayed their spending across all media formats until their economic outlook improves,” Koogle said. 

Yahoo said Wednesday that it will buy up to $500 million of its outstanding shares over the next two years, a move that could boost the price.  

Shares of Yahoo are trading more than 90 percent off their 52-week high of $205.63, set last March. 

Salomon Smith Barney analyst Lanny Baker said in a report that the company faces serious challenges but still should weather what he considers a cyclical downturn, considering the company’s excellent brand and $1.7 billion in cash. 

He also found what he thought was a silver lining, pointing out that the conditions choking Yahoo will likely hurt its rivals even worse, narrowing the competition in the long run.