Yahoo 2006 Profits Plunge as Revenues Rose

SAN FRANCISCO ~ Yahoo said this week its 2006 profits plunged by more than half from the prior year even as revenues rose from the internet search giant’s newly revamped advertising platform.

Yahoo posted net income of US$268.7 million, or 19 cents per share, in its 2006 fourth quarter, sharply lower than a year ago.

Yahoo had benefited in 2005 from investments and its final quarter of that year resulted in net income of $683 million, or 46 cents per share.

The company said 2006 fourth-quarter revenue rose to $1.702 billion, up 13 percent from a year ago.

For the full year, the company posted a profit of slightly more than $751 million, sharply lower than the $1.896 billion reported for 2005.

Yahoo’s stock price climbed more that five percent in after-hours trading on investor hopes that the company’s reorganization last year and the new Project Panama ad platform boded well for its future.

“I believe the future opportunities for Yahoo and the industry as a whole are bigger than ever,” Yahoo chief executive Terry Semel said during a conference call with analysts to discuss the earnings report.

“We reshaped our organization to capture these opportunities. I am convinced we are on the right path.”

Semel said all of Yahoo’s US advertisers would be switched to the Project Panama ad platform by April and that it would then be rolled out worldwide, beginning in Japan.

A new formula to prioritize placement of advertisements on search results pages, based on keywords, quality and bid price, will be launched by Yahoo on February 5, he said.

“We expect to see the revenue impact of the new ad system and ranking model to begin in the second quarter and gain momentum through 2007 and beyond,” he said.

“You will see ongoing innovation and development of next-generation advertising on and off the Yahoo network.”

Semel told analysts that Yahoo had been wooing users with features such as personal finance and food websites and expanding Yahoo Answers, “the largest collection of human knowledge on the web.”

Yahoo acquisitions last year included, a website for online talent contests, and mybloglog, a service that lets visitors to websites leave information about themselves.

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