) to underperform from neutral.
Analyst Jordan Rohan says he sees significant risk to Overture's business. He says Microsoft, which comprised one third of Overture's fourth quarter revenue, is increasing its investment in search platforms and is preparing to pursue its own paid search business. Rohan says without Microsoft and Yahoo, Overture would lose all operating profitability.
Rohan cut the $20 target to $6, based on the expectation that Microsoft and Yahoo will bring the domestic paid search in-house by April 2005; he says if this happens, valuation could approach $3. He cut the 84 cents 2003 earnings per share estimate to 50 cents, and cut the $1.27 2004 estimate to $1.25.