• by January 16, 2002

DoubleClick Inc.'s quarterly results shed a ray of optimism on the beleaguered online media sector, but analysts said Yahoo Inc.'s results Wednesday may set the tone for the market.

"I'm encouraged by DoubleClick's results. It does sound like the online ad business is seeing signs of stabilization," said Thomas Weisel analyst Gordon Hodge. "Our sense is that the online advertising business has stopped getting worse. It's not getting better necessarily but the elements are in place that it could lead to rebound later in year."

Online ad firm DoubleClick said late Tuesday its fourth-quarter net loss narrowed and it eked out an operating profit, before items, surprising analysts who were expecting a loss. While revenues still slipped from the year-earlier quarter, analysts noted small increases from the third quarter.

Wall Street analysts said Yahoo would likely reiterate its guidance for 2002 and could even take some of the estimates up slightly in the light of some of the acquisitions it has made recently.

However, others cautioned that Yahoo may follow in the footsteps of recent Internet companies such as AOL Time Warner Inc. and take a more conservative approach given the continued economic slowdown.

"If Yahoo sees a comeback, it's safe to say the ad market is starting to see some life," said US Bancorp Piper Jaffray analyst Safa Rashtchy. "But it doesn't mean it will trickle down to other companies."

Analysts cautioned that any good news would only benefit the leading players in the sector, especially because smaller online media companies did not have the critical mass of AOL Time Warner, Yahoo, Microsoft Corp's MSN or even DoubleClick.

Online media companies have been struggling with an ad slump and have taken a more conservative stance after disappointing last year.

Despite expectations for relatively positive to in-line news from Yahoo later Wednesday, the company's shares were off 4.3 percent, or 84 cents, at $18.63.

"The valuation is too high. Once it hit the low 20s, sellers came out of the woodwork," said Paul Kim, analyst at Kaufman Bros. "They had some good announcements last quarter, but now reality hits that the new direction is great but we're not going to see the (financial benefits) hit until late second-half. If you're a trader and are up $5 to $10, you're going to get out of there."

Yahoo reports fourth-quarter results after the market's close Wednesday.

Meanwhile, DoubleClick's shares rose 17 cents to $12.80.

While Chief Executive Kevin Ryan said he believed the marketing sector had bottomed, DoubleClick was betting on no ad growth for the year -- leaving itself room for some upside.

Lehman Bros. upgraded its rating on DoubleClick to a "buy," noting that the company's core technology business is stabilizing, progress on the cost side of the company's business, the sale and divestiture of money-losing operations and continued traction in new businesses.

"While the fourth quarter was solid from an execution standpoint and we are impressed with the company's ability to contain costs and right-size the business in a difficult economic and ad environment, we believe the recent share appreciation has reflected these improvements," said Goldman Sachs analyst Anthony Noto.

-- Reuters