Ask Jeeves Hits A Homer

  |  April 21, 2004   |  Comments

The search engine outdoes expectations and raises its financial forecast for 2004.

Search engine Ask Jeeves hit a homer in the first quarter of 2004, with net income of $13.4 million, or 23 cents a share. Revenue was $39.2 million, a 73 percent jump over revenue for the same quarter last year.

The driver of the home run was 42 percent growth in search queries on Ask Jeeves' proprietary Web sites, according to Steve Berkowitz, the company's CEO. The company also said it plans to put more of its revenue to work by increasing investment in its business over the next few quarters.

"We will continue to increase our investment in technology, site experiences and marketing. We'd like to make Teoma even more relevant and unlock more of its potential," said Berkowitz on the company's conference call with investors. "We'll speed up the launch of smart search features and we'll be more opportunistic with our marketing spend. We believe that we have the ability to innovate and change the landscape in search and these investments will allow us to accelerate those plans."

Ask Jeeves' 2004 first quarter far outdid the performance for the first quarter of 2003. In that quarter, GAAP income from continuing operations was $8.5 million, or 17 cents per share.

"It was a very good quarter, as we expected," said Safa Rashtchy, senior analyst at US Bancorp Piper Jaffray. "They have seen a bump in their traffic and they are getting to be a much bigger player. I think the guidance is conservative. They are playing in the best market and they are having a very good time."

Ask Jeeves is not the only search engine to rack up successful numbers for the quarter. Industry bellwether Yahoo reported even more outstanding results earlier this month.

Steve Sordello, Ask Jeeves' CFO, said revenue in the paid placement product line was up 80 percent, branded advertisements 15 percent, paid inclusion 2 percent and licensed revenues from a joint venture in Japan were up 2 percent. (Ask Jeeves recently decided to stop offering some of its paid inclusion products.)

The company is also phasing out what it calls "non-targeted" advertising, or banner ads. It recently removed banner ads from its UK site, and expects to continue that process.

"We believe that non-targeted advertising limits growth and is not beneficial to either the user or the advertisers," said Berkowitz. "Though this may reduce revenue in the short term, we believe this will significantly improve user satisfaction and increase loyalty in future quarters."

For the second quarter of 2004, the company predicted revenue of $38 million. It expects per-share earnings, excluding amortization, of 17 cents and net earnings of 16 cents per share.

These figures are for Ask Jeeves alone, not including income from its soon-to-be new acquisition, Interactive Search Holdings (ISH). Including ISH, second-quarter revenue is expected to be $55 million, with per-share earnings, excluding amortization, of 21 cents and net income of 15 cents.

For the full year, the company now expects revenues of about $255 million. In its earnings report for the fourth quarter of 2003, Ask Jeeves had upped 2004 financial guidance to revenue of $142 million. The full-year guidance includes ISH.

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Janis Mara

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