Experts warn Yahoo has further to fall

Yahoo is still an overrated company for investors despite the fall in its share price, US analysts have warned.

The firm's share price fell to $17.68 yesterday, compared with a peak of over $200. Its share price is based on valuing the stock at as much as 147 times the amount of its earnings - eight times the usual ratio.

Investors were prepared to take this gamble on Yahoo's future while market experts believed the firm's rosy predictions. However, now that it has so visibly failed to deliver, its chief executive plus its top executives in Europe, Asia, Canada and Korea have felt compelled to quit.

Yahoo was expected to make around $230m in turnover for the three months to the end of March, but instead now expects sales of only $170-$180m with next to no profit. Worse still, as far as the stock market is concerned, Yahoo cannot predict its turnover for the rest of the year.

The portal has enjoyed rapid growth because of its reputation as the 'must-advertise' position among websites. Its billboards are the most visited online, but as it has benefited far more than rivals from the internet boom, it is being hit just as hard by its dotcom clients going bust at a time when the rest of its advertisers slash their budgets.

Although Yahoo's websites are among the busiest on the internet, comparing earnings estimates with visitor statistics suggests it makes only 40 pence per visitor against every pound generated by the less popular but technology-interest targeted websites owned by Cnet.

Moreover, Cnet, the seventh largest internet firm in the US, this week also warned that its revenue would fall below expectations and saw a tenth wiped off its market value.

"Sometimes if you build it, they will come, but they might leave their wallet at home. This seems to be the case with Yahoo," analyst Arthur Newman told US media this week.

Analysts believe it will get worse for Yahoo and that more of its chiefs will leave as the full extent of its troubles come to light.