CSFB Lowers Overture Services to 'Neutral'

Analyst Heath Terry sees rising costs, and weakness in U.S. business, for the Internet search-engine developer

Credit Suisse First Boston downgraded Overture Services (OVER ) to neutral.

Analyst Heath Terry says the 18 cents first quarter earnings per share came in 4 cents above his consensus-matching 14 cents estimate, although excluding a one-time gain of $3.9 million, earnings per share would have been 15 cents. Meanwhile, Terry notes the company slashed the 60 cents to 70 cents 2003 earnings per share guidance to 35 cents to 42 cents on rising traffic acquisition costs, weakness in its U.S. business, and increased investment in product development and international expansion.

Terry says while the first quarter was solid for the company, which provides search-engine driven advertising services, the prospect of a substantial increase in costs and the execution risk that Overture faces raises his level of concern. He cut the 64 cents 2003 earnings per share estimate to 36 cents, and cut the $29 target to $15.

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