Vous êtes sur la page 1sur 4

Jackson Securities, LLC Equity Update

Research for the Prudent Investor September19th, 2006

Yahoo! (YHOO –HOLD) Guides to the Bottom Half of 3Q06 Range

Lowering estimates maintain target of $33

Quick First Look

Brian Bolan, Research Analyst
(312) 253-0578; BBolan@JacksonSecurities.com

Quick Discussion

At an investor conference today, Yahoo! CFO Susan Decker stated that the company would likely report
results that would be closer to the bottom half of the range previously given. The previous range that was
given was $1.115B to $1.225B in revenue and $445M to $505M in operating cash flow. Our previous
estimate was slightly above the midpoint of guidance, our new estimate reflects the changes in the market.

The reason for the lowered guidance is a slowdown in advertising spending in two key areas, autos and
finance. The realization of the drop in advertising in the auto segment has future spending put further in
doubt. Chrysler announced today that shipments to dealers would be lower by about 24% as demand has
slowed and inventories are already high. This brings a healthy amount of doubt into the picture for the
future growth of advertising in the auto segment.

The other key area that is experiencing a slowdown is finance. A key component of the finance
advertising market is the mortgage and re-finance component. This space has been hurt over the last
several months due to rising interest rates and high amounts of available new home inventories. The first
round of brokerage reports (Goldman Sachs, Lehman Brother, Bear Stearns) have come in on the high
side of expectations leading us to believe that this group is not likely to be pulling back on any internet
advertising dollars.

Important Disclosures

Jackson Securities, LLC seeks to do business with companies covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decisions. Please also refer
to the important disclosures found on pages 3 and 4. Analyst Certification is found on
page 3.

Quarter Estimates
Coming on the heels of a slight topline miss in the most recent quarter, investors are again shedding
shares of YHOO with the stock trading lower by around 12% on the day. The idea that a rising tide lifts
all ships is true in its inverse, and Google is being taken out to sea by this tide, dropping some 20 points in
reaction to the Yahoo! news.

During the call management noted that their market share has been 29.5% and 30% over the last two
years and they are pleased with this level given the significant competitive concerns in the market. We
noted in our last report on the company that the delay in the Panama project would likely not lead to any
market share gains in the second half of 2006, but could begin to produce results in 2007.

As a result, we are lowering our estimates for 3Q06. We are giving the topline a small haircut of about
$60M, which translates into a one penny reduction in EPS. Our target price is currently under review.

Income Statement
($ in millions, except per share) OLD NEW
Marketing Services, Gross 1505 1480
Less: TAC 511.7 547.6
Marking Services, Net 993.3 932.4
Fees 205 205
Total Net Revenues 1198.3 1137.4
Gross Revenues 1710 1685

Cost of Sales 173.8 164.9

Gross Profit 1024.5 972.5

Operating Expenses
Sales and Marketing 311.6 307.1
R&D 203.7 193.4
General and Adminis. 107.8 102.4
Amortization 50.0 50.0
Stock Comp 100.0 100.0
Total Op Expenses 773.1 752.8

Operating Income 251.4 219.7

Interest Income & Other 36.0 36.0

Pre-Tax Income 287.4 255.7

Taxes 125.0 111.2

Equity Earnings 27.0 27.0

Minoritiy Interest (0.3) (0.3)

Net Income 189.1 171.1

GAAP EPS $ 0.12 $ 0.11

Fully-Diluted Shares 1,513.3 1,513.3


Analyst Certification
I Brian Bolan hereby certifies that the views expressed in this research note accurately reflect
my personal views about the subject securities and issuers. I also certify that no part of my
compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this research report. I may be compensated in part based on the overall
profitability of Jackson Securities, LLC, which includes earnings from investment banking and all
other aspects of the firm’s business.

Conflicts of interest:
Neither Jackson Securities nor any of its publishing analysts or their immediate family members
has a position in the securities described herein.

• The research analyst has not received compensation based upon investment banking
revenues or from the subject company/companies in the last 12 months.
• Jackson Securities has not in the last 12 months managed or co-managed a public
offering of securities, received compensation for investment banking services from the
subject company/companies or any compensation for products or services other then
investment banking
• Jackson Securities does not expect to receive or intend to seek investment banking
compensation from the subject company/companies in the next 3 months.

Position as Officer or Director:

Neither the research analysts nor members of their immediate households occupy positions as
an officer or director with the company/companies mentioned in this report.

Market Making:
Jackson Securities does not make a market in the stock(s) mentioned in this report.

Explanation of Ratings:
Buy - Expected 12-month absolute performance of +10% or higher than the market price at which time
the rating was issued.
Hold - Expected 12-month absolute performance of +5% to –5% from the price at the time the rating was
Sell - Expected 12-month absolute performance of –10% or lower than the market price at which time the
rating was issued.

Distribution of Ratings:
Jackson Securities, LLC has a distribution of ratings among its coverage universe as follows:

Buys – 65.5% (38 of 58 active recommendations)

Holds – 31.0% (18 of 58 active recommendations)
Sells – 3.5% (2 of 58 active recommendations)

Jackson Securities has provided investment banking services within the previous 12 months with the
following percentage of the companies they have rated:

Buys – 2.64% (1 of 38 active recommendations)
Holds – 0% (0 of 18 active recommendations)
Sells – 0% (0 of 2 active recommendations)

Risks: General economic conditions, economic slowdown/recession, adverse industry news.

Other Important Disclosures and Disclaimers

Disclaimer: This communication is neither an offer to sell nor a solicitation of an offer to buy any
securities mentioned herein. This material should not be construed as an offer to sell or the solicitation of
an offer to buy any securities mentioned herein in any jurisdiction where such an offer or solicitation
would be illegal. We are not soliciting any action based on this material. This document is for general
information only, and it does not constitute a personal recommendation or take into consideration the
particular investment objectives, financial condition or financial needs of any clients. Before acting on any
advise or recommendation in this research report, clients should consider seek professional advice. Past
performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original
capital may occur.

The information contained herein has been obtained from sources that we believe to be reliable, but we do
not guarantee its accuracy or completeness. Any opinions expressed herein are statements of our
judgment on the date appearing on this material only and are subject to change without notice. We
endeavor to provide updates on a reasonable basis of the information discussed in research reports, but
there may be reasons which prevent us from doing so.

Additional Information: Any additional information, if applicable, supporting this recommendation may
be furnished upon request. This report is not directed to, or intended for distribution to or use by, any
person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction
where such distribution, publication, availability or use would be contrary to law or regulation or which
would subject Jackson Securities or its affiliates to any registration or licensing requirement within such
jurisdiction. This report is prepared for the use of Jackson Securities clients and may not be redistributed,
retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written
consent of Jackson Securities.

Jackson Securities, LLC.

Equity Research

Atlanta Chicago Stamford Dallas Houston

Sacramento Miami Milwaukee Bethesda

300 S. Wacker Drive

Suite 2450
Chicago, IL 60606

Phone: 312.986.8200
Fax: 312.986.0560
Trading: 1.800.642.1233