DoubleClick Disappoints

Online advertising technology player DoubleClick disappointed investors with its second quarter earnings, posting a profit of just $3.8 million, or $0.03 per share, on revenues of $69 million. The company also lowered guidance for the full year of 2004, citing weakness in ad management and its business-to-consumer catalog business.

Analysts had expected revenues of $71.8 million and net income of $0.04 per share. In the year-ago quarter, DoubleClick brought in $5.8 million in net income, or $0.04 per share.

“This is a disappointing quarter for us,” said Kevin Ryan, chief executive officer of DoubleClick. “Needless to say, we are not satisfied with our results.”

Because of the weakness — and the aggressive investment it believes is needed to combat that weakness — the company lowered its estimates for the full year 2004. DoubleClick now expects earnings between $0.13 and $0.17 per share. Previously it had given guidance of $0.23 and $0.28 per share. The company now expects to bring in revenues of between $290 and $305 million for the full year. It had previously predicted revenues between $294 and $314 million.

“We are focused on enhancing the performance of our core businesses, even as we continue to invest in our newer products,” said Ryan. “These increased investments may dampen our results in the short term, but we believe that they are necessary to improve long term growth.”

Ryan pegged ad management, which is comprised of its ad serving business, as one underperforming segment. Ad management brought in $31.8 million in the second quarter, compared to $32.6 million in the 2003 period. While both DART for Advertisers and Motif, the company’s rich media solution, grew, it wasn’t enough to outweigh the decline in the DART for Publishers business, the company said. Ryan attributed part of the difficulties to poor performance by the sales force, noting that DoubleClick had just hired a new manager for the business. He also attributed some of the declines to lowered pricing adopted to spur the renewal of long-term contracts.

Marketing automation, which includes DoubleClick’s email business, did better. Revenues came in at $14.6 million, as compared to $10.9 million in the year-ago quarter. The company attributed the growth both to new customer acquisition and the addition of a Marketing Resource Management (MRM) business. DoubleClick got into MRM with the acquisition of SmartPath in the first quarter.

The company isn’t yet reporting earnings for its Performics search division, the acquisition of which closed on June 24.

The company’s data business grew by 13 percent overall, but only because data management revenues made up for declines in the Abacus catalog business. Abacus — long an area of strength for the company — declined 2.4 percent year-over-year to $19.6 million. Data management, which DoubleClick acquired after the second quarter of last year, recorded revenues of $3.2 million.

Company executives attributed the Abacus weakness to difficulty in the business-to-consumer catalog market, leading to fewer mailings by customers.

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