The Day Ahead: Yahoo! dominates

The Web is being divided by the market capitalisation haves and have-nots. Yahoo!'s first quarter shows it is definitely in the "have" category

As the portal easily topped every metric that Wall Street set for the company, other dot-coms such as and are becoming information superhighway roadkill.

Yahoo has become so strong that seasonality has almost become an afterthought.

The conventional wisdom is that the first quarter is slower for most media businesses, but Yahoo had no problems. In its first quarter, Yahoo added more advertisers and extended contracts, while enabling more commerce than it did in the fourth quarter.

Yahoo's strong growth will turn up the heat on competitors such as America Online, Excite@Home, Lycos, Microsoft's MSN, NBCI and Disney's Go Network.

Investors will probably sell Yahoo shares today because the company missed the dreaded "whisper number" with earnings of 10 cents a share. But don't let the sell-off fool you -- Yahoo delivered a great, if uneventful, quarter.

Here are the vital stats: Revenue was $228.4m (£141m), about $8.4m higher than Wall Street's most optimistic sales estimate. International revenue accounted for 14 percent of sales, which more than doubled compared to a year ago. Merrill Lynch analyst Henry Blodget said if Yahoo reported revenue of $220m it would be his "dream case." Start dreaming Henry.

Page views were 625 million per day in March. Blodget expected 505 million page views. In March, Yahoo recorded 145 million unique users, including Yahoo! Japan, and 125 million registered users, up sharply from the fourth quarter. The company also enabled more than $1bn in transactions on its network. Yahoo enabled about $670m transactions in the fourth quarter.

As for the outlook, Yahoo wasn't that generous with the guidance. Expect the June quarter to be seasonally slower (no news there), but operating margins will increase. Outgoing financial chief Gary Valenzuela said analysts should bump up estimates for operating margins. Valenzuela, who will retire at the ripe old age of 43, upped operating margin estimates by 2 percent, so now look for 32 percent to 38 percent long term. In the first quarter, Yahoo had operating margins of 38 percent.

Strong get stronger

Armed with $1.1bn of cash in the bank and no debt, CEO Tim Koogle said the company would be expanding its broadband and wireless services. Officials said wireless access will play a big role in growing the Yahoo brand abroad.

Yahoo chief operating officer Jeff Mallett said he expects many international Yahoo users to get information via wireless devices. The payoff for wireless is three to five years from now, said officials.

Yahoo recently announced partnerships with Palm, Motorola and Sprint PCS. The portal also has alliances with numerous international wireless providers.

As for acquisitions, Koogle said Yahoo will go shopping, but only when it boosts the portal's market share or financial results. Koogle said the company's acquisition strategy would focus on media and communications services and commerce. He didn't name names or comment on the eBay acquisition rumors.

Weak get weaker

And now for those have-nots.

Add and to the critical list that includes, and CDNow., which recently boosted shares by riding shotgun with the Linux movement, said it will miss estimates in its fourth quarter and revenue will fall sequentially. A larger than expected loss with no revenue growth is catastrophic for company trading just above $4 a share.

Salon said it expects to report fiscal fourth quarter revenue ranging between $2.5m and $2.9m, down from $3m in the third quarter. sees a fourth quarter pro forma loss ranging between 35 cents and 42 cents per share, compared to a per-share loss of 49 cents in the third. Wall Street was expecting a profit of 33 cents a share. Look out below. will join on the loser list. The online software and e-commerce service provider said it will take a restructuring charge of between $11m to $14m in its first quarter. can't even get its restructuring charges right. The company originally projected a charge of $2m to $3m.

Welcome to the new economy -- for every "have" there's at least two "have-nots."

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