Investors flee Yahoo! as rev outlook ebbs

Netco to launch new search engine later in year

Marking one of the few recent negative signs in the red-hot Internet sector, shares in Yahoo! plunged 14% in after-hours trading Tuesday as investors soured on the growth prospects for the Terry Semel-led online media company.

Wall Streeters had apparently been planning on faster growth later in the year, when the Netco launches a new version of its search engine advertising service. But on a conference call with analysts, CEO Terry Semel said the initial launch is being delayed from the third quarter to the fourth, with full commercial launch not expected until the first quarter of next year.

That explained why revenue projections for next quarter and the full year didn’t rise, as many investors apparently expected, which led to a sharp selloff.

Yahoo!’s performance last quarter was in line with projections, as revenue rose 26% from the same quarter a year ago to $1.25 billion and net income dropped 78% to $164 million, largely because of a one-time gain last year and the decision to start expensing stock options. Excluding those two events, net income was up 8%.

Netco reorganized its Santa Monica-based media group under Lloyd Braun in May, bringing in CNET vet Vince Broady to oversee its entertainment properties and tapping David Katz to handle the small amount of content development it is doing (Daily Variety, May 23).

Since then, Yahoo! has upgraded its video site in an effort to compete with YouTube and also launched original Web series “The 9” that highlights viral videos.

Shares in Yahoo! closed up 1% at $32.24 Tuesday before dropping to $27.83 after-hours.

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