Fourth quarter income rises 62%

Strong growth in the Internet advertising market and new contributions from its Overture paid search business helped Yahoo! surge ahead of its 2002 performance, with revenue up 70% to $1.62 billion and net income of $239.7 million, more than double its net income last year.

For the fourth quarter, net income was $75 million, up 62% from the year-ago quarter, on revenue of $663.9 million, a 132% jump.

Yahoo! also reported its revenue minus the traffic acquisition costs (TAC) it pays partners to carry its search listings, arguing that’s a more appropriate measure of its performance, since partners also keep most of the revenue that comes from those searches. Without TAC, Yahoo! reported Q4 revenue of $511.3 million, a 79% increase, and full-year revenue of $1.47 billion, up 55%.

Company saw increases in its fee-based listing and premium services revenue, but advertising led the way with revenue up 178% over 2002 to $545.5 million. Excluding the acquisition of Overture, advertising growth was approximately 40%.

As the Web’s biggest portal, Yahoo!’s performance is a crucial indicator for the state of the overall advertising market, which seems to be back on a growth track, following the slump that started in 2001 following the dot-com bust.

Looking ahead, company predicted that first-quarter revenue excluding TAC will be between $475 million and $505 million with operating income of between $150 million and $170 million. For the full year, guidance calls for revenue excluding TAC of between $2.17 billion and $2.25 billion and operating income of $710 million to $800 million.

In a conference call with investors, CEO Terry Semel said new content and services that take advantage of broadband connections, including video, will be a growth area for the company.

“In 2004 we will place greater emphasis on the integration of more video and audio,” he said. “This will include the introduction of more premium services, while broadband is already positively impacting our advertising.”

He added that Yahoo! is already starting to build relationships with partners like Phillips and Sprint PCS to take Yahoo! content off the PC and take advantage of home networking and mobile devices.

Yahoo! shares fell 3% on Wednesday to $48.39, before the earnings announcement at the end of the day.

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