Merger Mania

It seems like merger mania has struck Inter@ctive Week's Fast 50 Rankings - causing Excite@Home and Yahoo! to shuffle in the pack. Excite@Home jumped from No. 33 to No. 1. The new marriage of Excite, the Web portal, and @Home, the "alternate" high-speed Internet access service, put the combined company first in the rankings, since the financials for the combined company easily trumped those of either company alone.

Yahoo! on the other hand, is just beginning to digest two major acquisitions - the $5.5 billion purchase of Broadcast.com and the $2.9 billion purchase of GeoCities - sending operating income diving into the red. Yahoo! lost $25.2 million on an operating basis in the second quarter, after having made $20.7 million the quarter before. Only 20 companies in the Inter@ctive Week Fast 50 rankings did worse. Leaving out the effects of the GeoCities acquisition, Yahoo! would have had operating income of $37.0 million, showing a quarterly growth rate of 78.7 percent.

Because of the operating loss, Yahoo!'s overall ranking sank to No. 44, from No. 4.

Yahoo! expects that its more recent acquisition, Broadcast.com, will ding earnings until the third quarter of 2000.

Another dim spot: Page views for the second quarter were a bit below expectations. Without GeoCities, Yahoo! averaged 270 million page views per day in June, just below some expectations of 330 million. That was only 15 percent more than the last quarter. During the previous quarter, page views had grown by an impressive 41 percent.

"Yahoo! has already had less sequential growth, and they had to push pretty hard to do it," says Nick Moore, a technology analyst at money manager Jurika & Voyles. "They do have a pretty good economic model."

Overall, Yahoo! can't be accused of struggling. Revenue grew 34 percent on a quarterly basis, to $115.2 million, and Yahoo! returned 200 percent to its shareholders.

As of June, it had 80 million unique visitors, and with GeoCities it reached more than 60 percent of Web users. During the same quarter in which its operating income slumped, Yahoo! signed on 575 new advertisers, bringing its total to about 2,700. The average length of its ad contracts grew to 166 days, from 145 days in the first quarter. The company has about 5,800 merchants in its store, and it boasts an 87 percent renewal rate. Yahoo! says closed auctions increased by 250 percent over the previous quarter.

But the ups and downs of the Fast 50 are not confined to combinations. Oracle has not been a regular in Inter@ctive Week's Fast 50 Rankings. During the past three quarters, it's appeared in the Fast 50 only once, coming in at No. 48 last quarter. This quarter it leaps to No. 6. In the quarterly sequential rankings, the company came in first. Oracle's quarterly revenue growth was 41.6 percent, better than all but 10 other entrants. In growth in operating income, calculated on a quarterly basis, Oracle came in at No. 17, with such income jumping 98 percent from $406.7 million to $806.3 million. Shareholders didn't do badly, either, grabbing a total return of 115 percent.

But even though Thomas Kurian, e-business vice president at Oracle, says his company runs 90 percent of the Internet's biggest trading sites and 93 percent of Internet initial public offerings, it's not clear how much it will continue to benefit from growing adoption of the Internet.

"Oracle always has the problem of what do they do when they've already sold a big player like eBay or Amazon all the Oracle they can eat," says Vernon Keenan, an Internet analyst at San Francisco-based Keenan Vision. "They've been struggling for four years to come up with a sales model that allows them to extract recurring sales revenues from customers like this."

The answer? Oracle's Business Online, which will compete with other application service providers such as Corio and USinternetworking. Kurian says it will take a business only 30 days to get up and running on Business Online, adding that Oracle is running a pilot program that will let customers rent space on customer relationship management modules hosted at Business Online.

Rival SAP has said it could eventually get 15 percent of its revenue from such rental income.

Oracle also is looking to benefit from the Internet-led rise in auction buying. It hopes to open Oracle Exchange, a portal for corporate purchasing, by year's end.