Yahoo! said in a regulatory filing Friday that its proposed merger with GeoCities will be in jeopardy if it doesn't qualify as a pooling of interests by regulators. The leading portal also expressed concern about its position in the market after a string of consolidation from within and outside the online world.
Yahoo! shares slipped 4 1/2 to 150 7/8 and GeoCities fell 2 1/8 to 96 3/8 in morning trading.
The portal company's filing indicates the uncertainty of current accounting conventions. Merging companies prefer to use "pooling of interest" accounting because it avoids extended write-offs. Paying for a merger over time dilutes earnings, making shareholders unhappy.
Yahoo! said the Geocities merger was made possible in part because Geocities became "poolable" in mid-January.
The Accounting Principals Board, Financial Accounting Standards Board and the Securities and Exchange Commission, as well as Yahoo! and GeoCities respective auditors all must conclude that the merger meets the criteria for pooling, the company said in a filing with the SEC. No pooling, no deal, said Yahoo!.
The Californian company also voiced concern that the recent mergers and investments of Disney-Infoseek, AOL-Netscape, USA Networks' Ticketmaster-CitySearch-Lycos, AT&T-TCI, At Home-Excite, and NBC-CNet's Snap could make it more difficult for Yahoo! to stay on top. "Yahoo! may be required to increase its sales and marketing expenditures significantly in response to these efforts, which may materially impair its operating results and may not be successful," Yahoo! said in the filing.
In addition to racking up greater expenses, Yahoo!'s real estate may face pricing pressure with a coming flood of advertising space from all these new competitors, impacting revenues. Also, Yahoo!'s may lose business from competitors offering services that better target users or provide better reporting of advertising results. Excite's MatchLogic is one such tool that could pose this sort of threat.
Yahoo! is 30-percent owned by SoftBank, with directors and affiliates holding 57 percent of the company. Softbank also holds a 71 percent interest in Ziff-Davis, the parent of ZDNet. ZD Inter@ctive Investor is the financial channel of ZDNet.