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By Frances Hong
Technology Writer

Yahoo! Corp. {YHOO} posted first-quarter earnings, before unusual items, of $63.3 million, or 10 cents a share, after the close Wednesday, beating estimates by a penny and more than tripling last year's first-quarter result of $17.7 million, or 3 cents a share.

Revenue for the period more than doubled to $228.4 million vs. $103.9 million a year ago.

In its earnings report, the company said that page views in the recent first quarter climbed to an average of 625 million per day, compared with 465 million in December.

The company also said that it has named Susan Decker, global head of research at Donaldson Lufkin & Jenrette, as its new chief financial officer, replacing Gary Valenzuela, who will retire in July.

"Business continues to be strong for the company, and management is more than capable of capitalizing on the opportunities it has," says WR Hambrecht & Co. analyst Derek Brown.

Brown rates the stock "buy," and has a 12-month price target of $400 on Yahoo! shares.

That isn't a bad price going forward, but how does the potential merger of top competitor America Online Inc. {AOL} and Time Warner {TWX} change the competitive landscape for Yahoo!?

Brown says the AOL-Time Warner deal bodes well for Yahoo! because it now stands as the largest independent distribution point for online content and services. "At the end of the day, AOL owns content that is in their best interest to promote," Brown says. And that could be a benefit to Yahoo!, which could pick up some business from AOL's content providers.

But should the AOL-Time Warner deal go up in smoke, industry watchers say it could have a negative impact on the entire portal space.

"It might be seen that the online media industry is not easy to integrate," says U.S. Bancorp Piper Jaffray analyst Safa Rashtchy. "The AOL-Time Warner deal was a major watershed event, and major advertisers could see it as a big wake-up call that traditional media could not get an online presence." If the deal doesn’t happen, Rashtchy says, it will be a setback to every expectation on converging online media with the traditional side.

While AOL attempts to complete the big dance down the aisle, Yahoo! is wasting no time expanding its efforts in hot areas like business to business, or B2B. The company spent the better part of the mid-1990s building traffic – now up to 505 million average daily page views -- including Yahoo! Japan -- and the past two years expanding into e-commerce -- which represents about 30 percent of total revenue in the first quarter, according to Merrill Lynch Internet analyst Henry Blodget.

Currently, the portal has an agreement with Hewlett-Packard Co. {HWP} to implement its intranets for corporate clients and the B2B marketplace. Yahoo!'s new B2B marketplace at B2B.yahoo.com, is a one-stop directory with more than 48,000 listings and more than 650 categories.

In a recent research report, J.P. Morgan’s Susan Walker White writes: "Yahoo! is smartly focusing on small- to medium-size businesses. This is a fragmented group of buyers and sellers and represents a rapidly growing market."

By the end of 2000, Piper Jaffray expects Yahoo! to have a clear presence in B2B and business-to-employee, or B2E, areas, which will propel its growth into 2005 and beyond.

"The B2B efforts are kind of a trump card," Rashtchy says. "This area could generate about 30 percent of its revenue in the next three to five years. The magnitude of this opportunity for the company is huge."

The market for Yahoo!, the analyst adds, won't just be about advertising, direct marketing, e-commerce and B2B. "This could be a $4 billion to $5 billion company in a few years."

But Needham & Co.’s Dalton Chandler doesn’t expect Yahoo! to sink large sums of cash into the B2B pot of gold. "Certainly, there’s nothing wrong with giving it a try, but they’re one of thousands of companies trying to do it," he says.

Indeed, says Chandler, it makes sense for Yahoo! to expand into B2C, such as consumer auctions, since that is the company's target audience. But he sees no particular advantage for the company in the B2B arena.

Citing valuation concerns, he rates the stock "hold."

AOL aside, what are Yahoo!’s competitive advantages over other portals?

For one, a larger, more-established audience, which currently boasts 131 million monthly unique users. It is also the top search site, according to research firm Media Metrix.

So when should investors buy into the Yahoo! story?

According to chief investment strategist Brian Belski of George K. Baum & Associates, Yahoo! is building a big base around the $150 level. "It’s a level that has been tested many times this year," Belski says. "I’d say this is a solid level."

Yahoo! 52-Week Stock-Performance Chart with 200-Day Moving Average