Yahoo---Carmen (fast)
Focus on tech stock
Interview: Fifth Third Tech Fund---Reddy, Sunil---Portfolio Manager
>> yahoo is raising its full year year earnings forecast after reporting net profit in the second quarter jumped on rising ad sales, earnings per share coming in at eight cents in line with what analysts expected. for more carmen roberts is here.
>> yahoo’s c.e.o. is using the search engine to sell more ads and that is boosting profit. second quarter net profit more than doubled coming in at eight cents a share compared to three cents a year ago. net profit was slightly better than estimates. sales rose42% also topping estimates yet shares are falling in after-hours trading. you can see down there about 5%. analysts say that many investors were expecting even better numbers from yahoo. it’s boosting its full year sales forecast. it now sees 2003 revenue coming in between 1.26-1.31 billion. the consensus is 1.28. yahoo sees the revenue for the third quarter, the quarter we’re in, the consensus there from thomson financial is $330 million. analysts say that investors -- that yahoo is benefiting from several things.
>> c.e.o. terry semmell, who took over two years ago has boosted revenues by more or less reinventing the company’s sale strategy. he’s teamed up with advertisers and is advising them on how to use the web to promote their products. yahoo is offering traditional online ads as well as what is called paid search advertising, where advertisers pay to have their websites listed at the top of search results saying that is paying off for the company. semmel said key drivers for success in the second quarter include more balanced growth in marketing services both in traditional advertising and the sponsored search as well as ongoing successes in converting customers and small businesses to the fee-based services. yahoo is benefiting from the rebound in advertising and jitil patel of deutsche banc securities says he’s looking for continued improvement in advertising.
>> about $220 million out of $315 million so over 50% of the business comes out of advertising, so i think that’s why it’s so critical to watch that line item, what the company’s commentary is and also how they’re feeling about the prospects in this environment.
>> analysts say thatia ha -- that yahoo’s expansion into broadband through partnerships with s.b.c. will bring more users and advertisers but much of that won’t materialize until 2004. jeetil patel with deutsche banc does not own any yahoo shares.
>> carmen roberts, let’s keep the focus on tech with the portfolio manager of the fifth third technology fund, and he joins us now from cincinnati. welcome.
>> good evening.
>> you own yahoo although you don’t follow it all that closely compared to other tech names. tell us what you think about their latest update.
>> the stock had a great run since the beginning of the year but fundamentally the company seems to be executing. i think the problem with a lot of traditional tech analysts have is valuation―how to value yahoo as a company. they’re putting up great growth. but it seems to be―valuation seems to be kind of stretched. that’s the reason the stock sold off a little bit even though they’ve executed well this quarter.
>> up 115% year to date. if you have held it through the beginning of the year you’re looking good.
>> right.
>> would you sell it now?
>> not really. again, it depends on what kind of horizon you have―if you’re a short-term oriented you might want to take some profits, but long term they seem to be doing all the right things. they’ve got a scalable model. and they’re putting up the growth. so if you’re a long-term investor i would probably hold onto it.
>> let’s talk about oracle. we’re getting headlines across the bloomberg professional service from oracle’s meeting that’s underway, and a company spokesperson apparently saying they will not raise the peoplesoft bid today. no major news will be announced by oracle from the analyst meeting according to the company. that should come as no surprise that we’ll get something today. what do you think of that oracle. where do you see this all heading?
>> in the near term, there is a lot of uncertainty around oracle’s bid for peoplesoft and how peoplesoft is trying to fend off the bid from oracle, and peoplesoft is trying to accelerate its merger with j.d. edwards, and on top of it peoplesoft announced an up side to the quarter which probably took revenue from future quarters, so from my perspective i’m staying away from the entire situation.
>> quickly, intel’s earnings due out next tuesday. you have intel in your fund. your fund is up 59% year to date. what do you think is going to happen next week?
>> i think of all the semiconductor companies, intel is very well positioned for the long haul, and even the short-term. the stock has had a great run. i think it’s on all cylinders. they’ve got great process technology, they’ve got -- little competition it’s got and on top of everything there seems to be strength in the notebook market where the growth is expected to be up 15-20% year-over-year, and i think intel is very well positioned.
>> sunil reddy, portfolio manager of the fifth third technology fund joining us. today’s economic data on u.s. wholesale inventories for may produced unexpected numbers.
