Analyst About Face Sends Yahoo! Lower

Yahoo! Inc. fell 1.06 to 28.50 Friday following reports that Merrill Lynchanalyst Henry Blodget said the company’s new plan to start charging auctionuser fees will generate less revenue than he previously thought.

According to reports, Blodget lowered his estimate for the amount of moneythe fees will bring in this year from an original US$80 million, to $16 million to $30 million, and cut his estimate of the average revenue generatedfrom each auction to 90 cents from $1.

Praise from Blodget and other analysts helped lift Yahoo! shares lastWednesday. U.S. Bancorp Piper Jaffray repeated a buy rating on Yahoo!,saying the announcement signifies the “start of monetization for a host offree Yahoo! services” and could add 5 cents per share to earnings in 2001.

Analysts say Yahoo! needs new sources of revenue to make up for a slump inthe online advertising market.

Last Tuesday, Yahoo! said that beginning January 10th, it plans to startcharging auction users listing fees ranging from 20 cents to $2.25. Feeswill be assessed on a sliding scale and will be based on the starting andreserve prices of the items.

“We believe a nominal listing fee will ultimately further improve thequality of our auctions service, thereby providing our buyers and sellerswith an even more compelling experience,” Yahoo! Auctions senior producerBrian Fitzgerald said in announcing the change. “Because we are not taking acommission and the fee is minimal, we are increasing the quality of listingswhile remaining price competitive and providing sellers with a bettermargin.”

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