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Follow UsNEW YORK: Shares of Yahoo! Inc. rallied on Thursday, after weeks of a 52-week
low, following a positive rating from Lehman Brothers analyst Holly Becker, who
had been among the first to turn negative on the stock last year. Yahoo shares
rose about 23 per cent, or $2-13/16, to $15-1/4, above a 52-week low of $11-3/8
but is still down more than 90 per cent from year-ago levels. The firm, like
several other Internet firms, has seen its share price tumble on a weak
advertising environment that is cutting into revenues.
The stock is also moving due to broader stock market gains, with the Nasdaq
up more than 6 per cent, or 107.52, at 1746.32, and the Dow Jones Industrial
Average up more than 3 per cent, or 309.04 points, to 9824.86. Yahoo's shares
have taken a battering in the recent weeks after warning that its earnings would
fall below already lowered estimates due to a deteriorating advertising climate.
It also began a search for a new chief executive to help it turn around its
fortunes, with Tim Koogle staying on as its chairman.
Becker raised her rating on Yahoo to buy from market perform and set a
12-month price target of $20. In a research note, she said it's time to jump
back into the stock because estimates are finally low enough and the valuation
of the stock is much more reasonable.
The company, which is one of the top sites people use to surf the Web, has
been the target of takeover rumors and Becker said the potential for such a deal
limits the downside on the stock. However, technologist strategist at Wit/Soundview
Arnold Berman, said the positive thing about Yahoo is that they continue to have
a lot of page views.
New strategies to offset revenue decline
Yahoo has also unveiled new initiatives this week aimed at eventually
offsetting the decline in ad revenues. On Thursday the company formed a pact
with Duet, a joint venture between Vivendi Universal and Japan's Sony Music
Entertainment, to market its on-demand subscription music service, which will be
launched this summer in the U.S. and late fall in Europe.
The pact is the latest in the music delivery space. Earlier in the week AOL
Time Warner Inc., Bertelsmann AG and EMI Group PLC formed a new company,
MusicNet, with software firm RealNetworks Inc., to build a subscription platform
that can eventually be licensed to other online music services.
Analysts see these types of music services as the source of strong revenue
potential for the industry as the demand for digital music grows in the wake of
popular song-swapping service Napster. However, analysts said the efforts will
take a while to impact the bottom line, they said it was a step in the right
direction.
Rumor of lay-off plague Yahoo!
However, there are rumors that the firm will do something that was once
perceived as unthinkable: lay off employees. This comes close on the heels of
the firm issuing an unprecedented warning of zero first-quarter and full-year
profit. "I've heard a lot of rumblings about layoffs," said an analyst
with W R Hambrecht, Derek Brown. "They could come next Wednesday (when
Yahoo reports first-quarter results) or they could come sooner."
Safa Rashtchy, of Bancorp Piper Jaffray agrees and says the firm would
probably reduce its staff, but might do it gradually through attrition or by
combining some of its divisions. A Yahoo spokeswoman declined to respond to the
reports of possible layoffs.
Tim Koogle, Yahoo's outgoing chief executive, became visibly nervous,
however, when he was asked the same question during a new product announcement
in New York on Tuesday. After a long pause, Koogle said the company would talk
more about its staffing situation on April 11, the day it reports first-quarter
results. Many of Yahoo's peer companies have already reduced their staffs to
balance the tough advertising business. But as recently as three months ago,
Yahoo had remained adamant in ruling out layoffs.
(C) Reuters Limited 2001.