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Yandex Sees 2013 Growth Slowdown as Profit Misses Estimates

Yandex NV, Russia’s largest search engine, fell the most in more than a year after reporting fourth-quarter earnings that missed analysts’ estimates and said sales growth will slow in its domestic market.

The company, which leads Google Inc in Russia with a more than 60 percent market share, fell as much as 14 percent in New York trading, the biggest intraday drop since November 2011. It was down 11 percent at $22.77 at 10.50 a.m., a more than three week low.

Net income was 2.69 billion rubles ($89 million) in the three months through December, compared with 2.12 billion rubles a year earlier, Yandex said in a statement today. That missed the 2.96 billion-ruble average estimate of three analysts in a Bloomberg survey. Net income adjusted for employee options was 2.97 billion rubles, Yandex said.

Yandex forecast revenue growth may slow to 28 percent to 32 percent this year from 44 percent in 2012. “This reflects our expectation for online text-based advertising in Russia,” Chief Financial Officer Alexander Shulgin told reporters. “The market has matured, and it’s impossible to grow at 60 or 44 percent a year anymore.”

The 2013 sales guidance is below an analyst consensus for 33 percent growth and “suggests that Internet advertising market growth is slowing fairly sharply,” David Ferguson, an analyst at Moscow-based Renaissance Capital, wrote in a note.

Yandex raised $1.3 billion in a 2011 initial public offering that priced above its target range as investors saught to cash in on Internet market growth in Russia.

Challenge Google

Internet advertising rose 35 percent in Russia last year to the equivalent of $1.87 billion, while growth was only 24 percent in the fourth quarter, according to Russia’s Association of Communications Agencies, or AKAR.

Yandex is defending its Russian market share against Google Inc. and is trying to expand in foreign markets such as Turkey. Last year, the company introduced a browser to challenge Google’s Chrome and got its maps added to Apple Inc.’s operating system for Russia.

CERN, the institute which runs a particle collider near Geneva, may announce some scientific discoveries made with Yandex’s technology within two or three months, Yandex Chief Executive Officer Arkady Volozh said.

Yandex had $895 million of cash and cash equivalents on its balance sheet as of Dec. 31.

“We live in such a turbulent environment that we prefer to have a cash cushion available,” Volozh said when asked whether the company may pay special dividends. The company doesn’t exclude a share buyback, he said.

Yandex said its margin for adjusted earnings before interest, taxes, depreciation and amortization was 48 percent in the fourth quarter.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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