Overture Set to Surpass Q4 Earnings Forecast

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Pay-for-performance search engine Overture Services Inc. expects to "substantially exceed" its previously reported earnings forecast for the fourth quarter of 2001. The company said yesterday that it should post its second straight profitable quarter when it announces earnings Feb. 12.

Overture also said it will increase its forecast for full-year 2002 earnings.

Overture expects to "surpass by a wide margin" its initial fourth-quarter forecast of $76 million in revenue, $10 million in net income and earnings per share of 17 cents. For 2002, it expects to exceed by 25 percent its previously announced forecast of $345 million in revenue and by 75 percent its previously forecast EPS of 45 cents, the company said.

For the third quarter of 2001, Overture reported revenue of $72.5 million. It posted net income of $8.9 million, or 15 cents per share.

According to Anthony Noto, an analyst with Goldman Sachs, Overture's revised forecast signals that the company has renewed contracts to provide search results to Yahoo and made progress in contract talks with America Online and Microsoft Corp.

"Our biggest question is how much of higher revenue guidance is driven by Yahoo, which extended its deal through the end of June?" Noto said. Overture's contract with Yahoo was scheduled to expire in March.

He noted that AOL and Microsoft combined accounted for 40 percent to 50 percent of Overture's third-quarter revenue. Noto previously said that Yahoo could contribute about $20 million in quarterly revenue.

Credit Suisse First Boston estimates that Overture will see its number of paid clicks rise 71 percent from the fourth quarter of last year to 390 million. It also estimates that the average price-per-click will rise to 22 cents in the fourth quarter, from 21 cents in the third. Overture also is expected to increase its number of advertisers in the quarter by 5 percent, to 51,500 from 49,000 in the third quarter.

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