Yahoo’s Stock Tumble on Slowdown News

Slowdown in advertising demand from automakers and financial services providers has made a dent in Yahoo! Inc’s profit and sales. The day after its July earnings disappointed investors, Yahoo stock dipped 13 percent. The company reported on Tuesday, it expects that the third-quarter results will be at the low end of its forecast range.

Chief Financial Officer Susan Decker said, “We have seen a little bit of weakness in the last three or four weeks….It is having an impact on our quarter.” To alleviate the fears of investors he added, “We're seeing slower growth, not anything more material than that…We think it's kind of early to tell whether this is a sign of anything broader.''

Decker's comments and Yahoo’s share slum had a cascading impact on the shares of Google Inc., EBay Inc. and Amazon.com Inc. The fear of slowing sales sparked concern of a general reduction in demand for Internet advertising and shopping.

Chuck Jones, an analyst at Atlantic Trust Stein Roe in San Francisco, commented on the share price fall, “This doesn't give you any warm and fuzzy feelings about Yahoo….It gets you to rethink what the growth rate is going to be for both Yahoo and the overall industry. When there's smoke you've always got to worry there's going to be fire.''

Meanwhile, Yahoo is scheduled to update its online advertising platform. The new technology, code named Project Panama, is supposed to be rolled out during the fourth quarter. This should put yahoo’s weakness (if any) behind.

Yahoo had forecast third-quarter revenue of $1.12 billion to $1.23 billion excluding traffic acquisition costs. Traffic acquisition costs refer to the cut which affiliated Web sites take of Yahoo revenue for running Yahoo advertising on their own sites. Yahoo shares were down $3.52, or 12.1 percent, to $25.48 in early afternoon trading on NASDAQ after going as low as $25.11 a share.