Yahoo CEO sees subscribers ahead of forecast

Ben Berkowitz

LOS ANGELES: Internet media company Yahoo Inc., for which subscription services are a key to the future, will end 2002 with more subscribers than it expected and is on track for industry-defying ad sales growth in 2003, its chief executive said. Terry Semel told investors at a Credit Suisse First Boston conference in New York that Yahoo would pass its target of 2 million subscribers by the end of the year and post 20 percent growth in marketing services in 2003.

His forecast contrasts sharply with the outlook provided on Dec. 3 by AOL Time Warner Inc., which said ad sales at its America Online Internet access business would be down as much as 50 percent next year. Yahoo's marketing services business includes ads and paid search listings.

The company offered no changes to the guidance it gave in early October, with a forecast for 2003 revenue of between $1.08 billion and $1.18 billion and earnings before interest, taxes, depreciation and amortization, or EBITDA, of $250 million to $300 million.

Chief Financial Officer Sue Decker said Yahoo expected it could reach annual revenue of $1.8 billion in two to four years, with an EBITDA margin of more than 30 percent.

Decker said that through the third quarter, 70 percent of the company's subscription revenue came from four services: Internet access, personal ads, extra e-mail storage and the ability to access Yahoo mail through standard e-mail programs.

Expanding access services

Semel said he expected Yahoo to get more involved over the next year in Internet access partnerships with cable and phone companies, as it has now with SBC Communications Inc. "We will participate, as the other big companies will, over the next year's time, no doubt about it," Semel said.

While Semel declined to offer details on pricing or the nature of those plans, he indicated that all the big Internet media companies would be involved in so-called "bring-your-own access" deals in the next year. AOL last week indicated it was more aggressively pursuing such deals as many of its subscribers sought broadband connections through other sources.

With such a package, users would still be able to keep AOL e-mail, instant messaging and content, for example, regardless of who they connect to the Web through.

"We're not defending a dial-up business," Semel said about AOL's recent strategy to push into paid services to help offset a slowdown in other areas of its business. "And we have a six month to one year head start in on all our competitors." Semel also said the future deals with cable and phone companies would not be structured in the same way Yahoo's SBC deal, indicating that the company's first access deal was a unique situation.

Shares in Yahoo rose sharply late in the afternoon as the company made its presentation at the conference, ending the day 6.9 percent higher at $17.60 on Nasdaq. The shares are up about 84 percent since the start of the fourth quarter, compared to a 19 percent rise for the Nasdaq.

© Reuters