Yahoo! surprises itself and investors.(Business)

Byline: Louisa Nesbitt and Martin Faint

Yahoo! has unveiled its most successful quarter to date with a strong performance across all divisions substantially boosting profits.

The California-based firm more than doubled its profits after seeing a rise in turnover that was ahead of both its own and analysts' expectations.

And announcing its ninth straight rise in year-on-year quarterly turnover growth, an increased optimism in the business also prompted Yahoo! to lift its forecasts for the full year.

'I think we are just at the beginning of our ability to talk to larger advertisers and satisfy a much greater need of theirs,' said Yahoo! chairman and chief executive Terry Semel, a former Hollywood studio head who has spearheaded the firm's postbubble makeover by beefing up its products, technology and services.

The group, which is one of the internet's most visited sites, said turnover for the first quarter to March 31 was pounds 411 million, up 168 per cent on the same period of 2003.

Gross profits for the period were pounds 258 million, against pounds 130 million last year.

'Yahoo's performance surpassed even our high expectations, delivering the most successful quarter in the company's history,' said Mr Semel.

Yahoo! was founded in 1994 by two PhD students, David Filo and Jerry Yang, and was known as Jerry and David's Guide to the World Wide Web.

It has since become a global brand with more than 237 million users in 25 countries, operating in 13 languages.

Mr Semel said the entire business had performed successfully, with strong growth in its feebased and marketing services.

Fees revenues lifted 39 per cent -mainly driven by the growth in the number of people paying for its premium services.

At the end of the quarter some 5.8 million people were paying for these services, compared with 2.9 million at March 31 last year. The company posted a 235 per cent increase in revenues at its marketing services division and a 16 per cent rise in listings revenue.

It also talked down the threat posed by Google, which is shortly to launch its own email service.

With its main search business under attack by Yahoo! -and soon by Microsoft -Google has struck back with the announcement of a free email service that will offer users more storage than is provided by Yahoo! or Microsoft's Hotmail.

'Yahoo! is accustomed to having competitors in almost every space we're in,' said Mr Semel.

'We've been in the email space for a long time. We're so much in touch with our users that we'll know how they feel about what they need.'

Yahoo! lifted its revenues forecast for the year ending December 31 to between pounds 1.31 billion and pounds 1.37 billion.

It also said it expected to deliver annual earnings before depreciation and goodwill of between pounds 483 million and pounds 526 million and unveiled a two-for-one stock split for its shares which reached their highest levels since November 2000.

The stock had already risen more than seven per cent since the start of the year, which has been taken as a bullish indicator for the entire net sector.