Overture Profit Down, Stock Tumbles
Thu February 6, 2003 06:49 PM ET
PASADENA, Calif. (Reuters) - Overture Services Inc. OVER.O , an Internet advertising company, on Thursday said its fourth-quarter net profit fell from the year earlier as a 97 percent increase in revenues was offset by higher expenses and a charge related to settling a legal dispute.
Overture shares slid to $18.95 in extended trade on Instinet from its Nasdaq close of $22.37 after the company, which provides "paid listings" or ad space that is linked to Internet search engine results, said it saw key Internet traffic acquisition costs rising in the current quarter and through 2004.

Overture is seeing those costs increase as it depends more heavily on accessing search engines on large Web sites run by partners such as Yahoo Inc.YHOO.O and Microsoft Corp.MSFT.O , and as it expands internationally.

At the same time, the company is under pressure from Yahoo and the likes of privately held search engine operator Google, U.S. Bancorp Piper Jaffray analyst Safa Rashtchy said.

"All of the players have realized this is a gold mine," Rashtchy said, noting that as a result Overture is spending more aggressively to protect its lead position in the market.

REVENUES UP, PROFIT DOWN

Pasadena, California-based Overture posted fourth-quarter net income of $9.5 million, or 16 cents per diluted share, including a one-time payment of $8.7 million stemming from a contract dispute with former affiliate InternetFuel.

It had a net profit of $20.8 million, or 35 cents per diluted share, a year earlier.

Excluding the charge, Overture in the 2002 quarter had a profit of $14.7 million, or 24 cents a share.

Revenue grew to $199.6 million from $101.2 million, in line with the company's recently-raised forecast calling for revenues of nearly $200 million.

Overture's results came in ahead of analysts' average call for a profit, before items, of 23 cents a share and sales of $194.18 million, according to Wall Street tracking firm Thomson First Call.

Nevertheless, traffic acquisition costs rose more than 140 percent to $124.8 million from $51.9 million a year earlier.

As a percentage of revenue, traffic acquisition costs were 62 percent in the fourth-quarter of 2002, compared with 51 percent a year ago.

Maybe they might have to revise their format to eliminate the Gator and HBO PPCSE partnerships seeking split fees for draining their keyword accounts.

Charlie ...

If they won't adopt and feed a bird ..flip them one! BBQ some Gator and remember to flush WhenU..