- It's been an unpleasant week so far for US Web portal Yahoo. Monday saw the company reprimanded in a French court, while come Tuesday Yahoo's share price fell to a two-year low on fears that the company's reliance on Web advertising might prove problematic to its bottom line.
The company's stock closed regular trading Tuesday at $US41.67, having earlier dipped to a two-year low of $40.56. The stock was down on Monday's close of $48.87, and far from its 52-week high of $250.
A French judge Monday ordered Yahoo to block its users in that country from being able to link to Web sites selling Nazi memorabilia. The judge gave Yahoo three months to come up with a filter to disable such links.
Yahoo has long been a bellwether Internet stock, giving industry watchers a sense of how the Internet economy is performing. The company has also been held up as one of the few Internet businesses actually turning a profit.
The drop in Yahoo's stock price can be partly attributed to two negative analyst reports from Merrill Lynch and Morgan Stanley Dean Witter which appeared Tuesday. In his report, Henry Blodget, a Merrill Lynch vice president for Internet/e-commerce based in New York, describes Yahoo as "currently facing the toughest challenge of its young life: the first 'harsh winter.' "
Blodget said Yahoo's first-quarter financial numbers are at risk, with the online advertising market in the short term continuing to experience only single-digit growth annually and being unlikely to bottom out until the first quarter. Merrill Lynch continues to believe in the long term growth of online advertising. Yahoo is due to report its fourth-quarter and year-end results the week of Jan. 11, 2001.
Should Yahoo make it through the upcoming tough winter by diversifying its revenue and adding more management, the company's stock is likely to rebound to $200 by the end of 2001, Blodget said. Should Yahoo not take such measures, the Web portal might face "significant near term downside" as early as the first quarter, he added.
Blodget's report made grim reading for many in the Net space, as he reiterated Merrill Lynch's belief that the Internet business sector "is experiencing the 'end of the beginning.' " He added that the bulk of Internet companies are likely to vanish, although a "handful of strong companies will rise from the wreckage" and be strong stocks.
The U.S. financial markets have been very jittery of late, tending to overreact to any company warnings. For instance, back in September, chip giant Intel Corp.'s third-quarter profit warning sent the company's stock plummeting 23 percent in after-hours trading.
Last month, Intel Chairman Andy Grove proved he was no fan of Yahoo in a debate with the company's cofounder and self-styled chief Yahoo, Jerry Yang. Grove suggested that Yahoo and its ilk need to focus on more traditional businesses principles in order to continue in business, and suggested that the new economy boom was well and truly over.
Yahoo, in Santa Clara, California, can be reached at +1-408-731-3300 or at http://www.yahoo.com/.