Panama-Related Revenue Gains Not Yet In For Yahoo

Yahoo's first-quarter profit and sales trailed analysts' estimates after Panama failed to generate the revenue gain some investors expected.

Net income fell 11% to $142 million, or 10 cents a share, from $159.9 million, or 11 cents, a year earlier. Sales rose 9% to $1.18 billion, excluding revenue passed on to partner sites.

During a conference call with investors, Yahoo CEO Terry Semel and CFO Sue Decker were cautiously optimistic -- and with good reason.

Semel said all U.S. advertisers have been successfully migrated to Panama as of March 30. As of yesterday, the platform had been introduced to a small number of advertisers in Japan, with plans to release it to a broad base by the end of the week. Decker said second-quarter financials should reflect Panama's results and be more in line with projections of a 20% sales increase for the full year.

While results have been mixed depending on advertiser, the net review is that the Feb. 5 release of Panama is resulting in higher levels of click-through rates.

"Investors have confused the initial success that Yahoo has had with Panama with the overall company performance," said analyst Jordan Rohan of RBC Capital Markets. "The company clearly is still in transition."

But some of the most promising news is coming from mobile and social networking features, Decker said.

The biggest coup may have been cementing a relationship with Viacom. As the exclusive provider of sponsored search and contextual ads for the media conglomerate, Yahoo has access to Viacom's most popular brands and in turn, their relevant audiences. Said Decker, "Viacom's need to protect [its] valuable content" led Viacom to choose Yahoo as its "industry partner of choice."

Yahoo's "sharpened focus on the audience" extends to social networking as well. In an interactive partnership with MTV, Yahoo will sponsor the first ever presentation of user-generated content at the MTV Movie Awards, with content delivered from its social sites like Flickr and Answers.

Without specifically naming Google, pointed references were made to the just-announced DoubleClick deal, with both Semel and Decker emphasizing Yahoo's desire to be open, transparent and a partner to all.

Revenues from Yahoo's top 200 advertisers increased by 20% for the period, Decker said.

Meanwhile, in an effort to drum up consumer visits, Yahoo plans a major consumer-marketing push in the second quarter with ads promoting the search benefits of Panama, Yahoo mobile services, and the popular Answers feature.

Shares of Yahoo fell $2.55, or 7.9%, to $29.54 in extended trading after the report. They had climbed 48 cents to $32.09 at the New York close.

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