Thriving Yahoo steals AOL's spotlight

"By any measure, Yahoo's fourth quarter looks exceptionally strong," gushed Alex Berenson of the New York Times. As Berenson reported, the company's revenue rose from $US91.3 million in the fourth quarter of 1998 to $201.1 million in the last quarter. Its audience doubled to 120 million worldwide, while pageviews were up to 465 million a day in December 1999, compared to 167 million a year before.

Wired News said that Yahoo's quarterly report "serves as a bellwether for the rest of the industry. In past quarters, strong earnings reports from Yahoo have boosted shares in the overall Internet sector."

Yahoo's news was so good that most stories barely mentioned the fact that the company's stock slid nearly 5 per cent. According to CBS MarketWatch, shares of Yahoo fell to $US378.875 in after-hours trading.

Rather than focus on declining stock prices, most of the media cheered Yahoo's commitment to independence. "While Yahoo executives did not absolutely rule out a merger in response to several questions from analysts, they reaffirmed the benefits of remaining independent and open to partnerships with many companies," reported Berenson. Yahoo president Jeff Mallett got in a slight dig at the AOL-Time Warner merger, telling Reuters' Andrea Orr, "We got all excited last year when Disney said they wanted to acquire Infoseek, and that hasn't been a home run, to say the least."

The Washington Post and Wall Street Journal got their take on Yahoo's independence straight from top man Tim Koogle. "Heck no, Yahoo won't go that way," he told both papers. The Post noted that an acquisition on the Disney or Time Warner scale wasn't exactly Yahoo's style. "In building a global branded network, we've always had an approach that has served us well by being open and comprehensive," Koogle told the Post's David Streitfeld. Not that it won't remain "opportunistic" about adding to its business, but Yahoo is so intent on going it alone that its executives like to refer to the company as "Switzerland", according to the Journal's Kara Swisher.

Meanwhile, shares of AOL have dropped since word of the company's merger with Time Warner was announced. AOL has slid from $US72.88 on Friday to $64.50 at the close of trading yesterday. Time Warner's stock took a big bump on news of the deal -- from $64.75 to $90.19 -- but headed down 5.7 per cent on Monday to finish at $85.06.

The Los Angeles Times chalked up the falls to a realisation by investors that a lot of work has to be done to bring the merger off. The companies are melding bureaucracies that have sharply different cultures and reconciling two different financial structures. Moreover, the financial structure of AOL Time Warner may depress profits for as long as 20 years. According to the Journal, investors are struggling over benchmarks -- cash flow, cash earnings, and revenue -- that Netcos have wriggled out of using so far. "The market will tell us how to value this," one trader told the Journal. So far, the market's got no clue.

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