Sept. 19 (Bloomberg) -- Yahoo! Inc. said profit and sales this quarter will be at the low end of its forecast because of slower advertising demand in some industries, sparking a decline in technology stocks.

``We have seen a little bit of weakness in the last three or four weeks'' from automakers and financial services providers, Chief Financial Officer Susan Decker said today at a Goldman, Sachs & Co. conference in New York. ``It is having an impact on our quarter.''

Decker's comments surprised investors and sent the shares, already hurt by a 26 percent stock slide this year, down as much as 14 percent. Slowing sales growth at Yahoo, the most-visited U.S. Web site, sparked concern of a general reduction in demand for Internet advertising and shopping, prompting a drop in shares of Google Inc., EBay Inc. and Amazon.com Inc.

Shares of Sunnyvale, California-based Yahoo fell $3.25, or 11 percent, to $25.75 at 4 p.m. New York time in Nasdaq Stock Market composite trading, after touching $25 earlier. Mountain View, California-based Google, owner of the most-used search engine, dropped $10.88, or 2.6 percent, to $403.81. San Jose, California-based EBay fell 89 cents to $25.95 and Amazon, based in Seattle, dropped 50 cents to $31.58.

``This doesn't give you any warm and fuzzy feelings about Yahoo,'' said Chuck Jones, an analyst at Atlantic Trust Stein Roe in San Francisco, which has $16 billion in assets, including Yahoo shares. ``It gets you to rethink what the growth rate is going to be for both Yahoo and the overall industry. When there's smoke you've always got to worry there's going to be fire.''

Forecast

``We're seeing slower growth, not anything more material than that,'' Decker said today. ``We think it's kind of early to tell whether this is a sign of anything broader.''

Google doesn't comment on its current quarter's performance, spokesman Mike Mayzel said. Amazon.com spokeswoman Patty Smith said the company doesn't provide mid-quarter updates on business. EBay spokesman Hani Durzy wouldn't comment other than to say the company's guidance for the current quarter and the full year remain unchanged.

Yahoo in July forecast net sales of $1.12 billion to $1.23 billion for the third quarter, which ends Sept. 30, and operating income before depreciation, amortization and stock- based compensation expenses of $445 million to $505 million.

``It shows that Yahoo is cyclical,'' said Philip Remek, an analyst at Guzman & Co. in Coral Gables, Florida. He has a ``perform in line'' rating on the Yahoo and said he doesn't own it. ``It's an ad model and if the overall economy is weak it will hurt results.''

Traditional Echo

Yahoo's announcement surprised investors because companies appear to be spending a greater portion of their ad budgets online. The Internet's share of global online advertising budgets is expected to rise to 8.3 percent in 2012 from 3.7 percent in 2005, Merrill Lynch & Co. analyst Justin Post wrote in a Sept. 12 report.

``This report sounds more like what a traditional media company, a TV company, would say about economic weakness or industry issues regarding certain clients that are economically sensitive,'' Remek said.

Ad Spending Categories

Financial services accounted for 33 percent of U.S. display ad spending on Yahoo in the last week of August, the highest of any category, while automotive took 2.6 percent, according to estimates from market researcher Nielsen//NetRatings.

Dow Jones & Co., publisher of the Wall Street Journal, yesterday cut its forecast for third-quarter profit, citing declines in financial and technology ads. Automakers aren't spending as much at Barron's, Dow Jones said.

Tribune Co., the second-largest U.S. newspaper publisher, said on Sept. 14 that advertising revenue decreased 2.3 percent in August.

``We are starting to see some advertising weakness in some of the most economically sensitive categories,'' Yahoo said today in a regulatory filing that followed Decker's speech. ``Growth is still positive, but it is slower in Q3 than it was in the first half of the year.''

Housing construction in the U.S. plunged 6 percent last month, the Commerce Department said today, prompting concern the rest of economy will be dragged down.

Advertising May Suffer

A slowdown will hurt the online advertising industry, said Martin Pyykkonen, an analyst at Global Crown Capital in Denver.

``The Internet sector may be relatively less affected but it certainly won't be immune,'' he said.

Yahoo stock had its biggest drop ever, a decline of 22 percent, the day after its July earnings disappointed investors. Yahoo, which trails Google in search, said at the time that it delayed the release of new advertising software that was designed to help generate more sales from Internet searches.

That result prompted analysts at J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc. to downgrade the stock. Piper Jaffray & Co. analyst Safa Rashtchy described the second- quarter report as ``a major frustration.''

Yahoo is also fighting new competitors including News Corp.'s MySpace.com friend finder. This week, Yahoo outlined plans to spend millions of dollars on a new advertising campaign.

To contact the reporter on this story: Jonathan Thaw in San Francisco at jthaw@bloomberg.net

Last Updated: September 19, 2006 16:25 EDT