October 17, 2006

Fighting to keep up with its top competitor Google, Yahoo reported 3rd quarter sales today that were slightly lower than expected.

Although the company delivered earnings that matched most analysts' expectations, Yahoo did forecast a current quarter outlook that will be weaker than initially predicted.

Yahoo's stock hovered in after-hours trading Tuesday. Its shares fell slightly in regular trading on Nasdaq, after Yahoo was initially downgraded to a "neutral" by Cowen and Company.

After its so-called Traffic Acquisition Costs (TAC), the Sunnyvale, CA.-based media company reported revenue of $1.12 billion, up 20 percent from a year ago, but still lower than Wall Street's consensus estimates of $1.14 billion. TAC is revenue that Yahoo has to share with some of its partners.

Additionally, Yahoo said it expects sales for the fourth quarter, excluding TAC, to come in between $1.145 billion and $1.265 billion. Analysts had been expecting revenue of $1.3 billion.

Overall, the company posted a net profit of $159 million, or 11 cents a share, in line with consensus estimates. Yahoo reported a profit of $254 million, or 17 cents a share for the same period in 2005.

In 2006, Yahoo's shares have dropped almost 40 percent, making it the second worst performing stock in the S&P 500.

Advertisers and many investors have been concentrating more on Google, which will report its latest earnings Thursday. Google made a big splash last week when it announced it would acquire online video sharing site YouTube for $1.65 billion.

Yahoo is facing a tougher challenge from the likes of Microsoft's MSN, IAC/InterActive's Ask.com and MySpace, the popular social networking site managed by media giant News Corp.

Source: Yahoo Finance