DoubleClick woes linger
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July 10, 2001: 10:30 a.m. ET
Net advertising firm's 2Q to be sharply lower as ad slowdown continues
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NEW YORK (CNNfn) - Internet advertising company DoubleClick Inc. is set to report a wider second-quarter loss Tuesday as the advertising market continues to suffer through a slowdown in the U.S. economy.
Wall Street analysts expect New York-based DoubleClick to report, after the closing bell, a second-quarter loss of 8 cents a share, according to earnings tracker First Call. The company lost 3 cents a share in the second quarter a year ago.
In April, the company warned its second-quarter loss would be steeper than the 2 cents a share analysts expected at the time, just days after it had announced it was cutting 10 percent of its workforce of about 2,000 and making "fundamental changes" in its ad-selling business.
"We have taken the steps necessary to stay lean and mean," chief financial officer Stephen Collins said in April, when projecting second-quarter results. "As the economy recovers and advertising dollars are allocated more and more to online media, DoubleClick will benefit enormously."
DoubleClick provides targeted Internet advertising for more than 1,500 Web sites, using technology that collects and analyzes audience behavior to predict which ads will be most effective. With its recent reorganization, DoubleClick hopes to focus more on this business.
The firm also sells ad space at several sites, including AltaVista, Travelocity, and Egghead.com, but that business has put a real strain on DoubleClick's results. In the first quarter, DoubleClick posted a net loss of $10.5 million, or 8 cents a share, on revenue of $114.8 million.
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DoubleClick and most other ad companies have been hurt by a sharp downturn in the advertising market, resulting from a slowdown in the U.S. economy. High energy prices and the bursting of the Nasdaq technology stock bubble last year led consumers to stop buying goods and businesses to stop spending money.
Many analysts expect the economy to recover in the second half of 2001, and DoubleClick and other advertising firms hope the ad market improves as well.
"The online advertising market appears to be stabilizing, but we believe it will continue to remain challenging for the foreseeable future," Merrill Lynch analyst Henry Blodget said in a research note.
Blodget said he continued to rate DoubleClick (DCLK: up $0.28 to $13.04, Research, Estimates) shares as "neutral" and termed them "expensive."
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DoubleClick's suffering this year was exacerbated by the collapse of scores of dot.com companies, many of which had poured money into advertising in order to raise their profiles.
But traditional ad venues have not been immune, either; during last year's advertising boom, dot.com companies also spent a great deal to advertise on television.
Those days are long gone. ABC, NBC, CBS and Fox recently ended a dismal pre-season, or "upfront," sales campaign, taking in under $7 billion, a 14-percent drop from the same time last year.
Analysts had expected only a 10 percent decline in the season, in which networks try to sell 75 to 80 percent of their ads for the year. The news didn't bode well for cable companies, which now are in their upfront sales season.
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