Yandex Dethrones Microsoft as Valuation Swells: Russia Overnight

Yandex NV rallied to its most expensive level ever versus Russian stocks traded in the U.S. as the company overtook Microsoft Corp. on global Internet searches and web advertising grew in 2012.

Shares of Yandex jumped 1.7 percent to $24.33 in New York yesterday, the highest level this week. Russia’s most-used search engine traded at 28.6 times estimated earnings, more than six times the average valuation of companies listed on Bloomberg Russia-US Equity Index. The gauge of the most-traded Russian stocks in the U.S. fell 0.7 percent. Futures on the RTS Index slipped 0.3 percent to 159,610 by 5:28 p.m. in Moscow.

Yandex unseated Microsoft’s Bing to become the world’s fourth-biggest engine by number of searches in November for the first time on record, ComScore Inc. said yesterday. Web advertising in Russia, home to at least 16 million Internet users, rose 35 percent in 2012, outpacing 13 percent growth in total advertising, data released Feb. 5 showed. Yandex got 90 percent of third-quarter revenue from text-based ads.

“Russian speakers prefer Internet searches in Russian, and Yandex firmly holds the biggest share, competitors are nowhere near it,” Konstantin Chernyshev, the head of research at UralSib Capital Corp., which rates Yandex a buy, said by phone from Moscow yesterday. “The Russian Internet advertising market expands and Yandex wins. You don’t advertise your shoe repair kiosk on national television, you advertise it on Yandex.”

Russia’s Micex Index fell 0.5 percent to 1,523.12 today, led by LSR Group and OAO Sberbank, the nation’s largest lender.

Growing Market

The Russian advertising market grew to 300 billion rubles ($10 billion) in 2012, with Internet ads expanding more than any other segment of the market, according to the Association of Communication Agencies of Russia, or AKAR. The data excludes value-added tax, AKAR said in a statement on its website.

Online advertising in Russia will rise by an average 22 percent a year between 2013 and 2016, UralSib’s Chernyshev said.

While Yandex, which has jumped 13 percent in New York this year, surpassed Microsoft’s Bing by number of searches, it trailed Google Inc., Beijing-based Baidu Inc. and Yahoo! Inc., Reston, Virginia-based ComScore said yesterday.

Searches on Yandex rose to 4.6 billion in November and 4.8 billion in December, while the tally for Bing held at 4.5 billion in both months. The Russian Internet company had the lowest number of so-called unique searchers among the world’s five biggest providers, the data showed. Yandex had 74.4 million users in December, compared with 268.6 million for Microsoft, according to ComScore.

‘Russian Audience’

“It’s thanks to the Russian audience that the number of Yandex searches grew,” Tatiana Komarova, a Moscow-based spokeswoman for the company, said by e-mail yesterday. “Internet penetration is still low in Russia and it continues to grow by adding older people and residents of small towns.”

Russia had 16.1 million IPv4 addresses in the third quarter of last year, compared with 99 million in China, 145 million in the U.S. and 683 million worldwide, according to Akamai Technology’s State of the Internet report released last month. Internet penetration in the world’s largest energy exporting nation grew 23 percent year-on-year, the data showed.

Tara Gremillion, spokeswoman for Waggener Edstrom Worldwide, a media relations company for Microsoft, did not immediately respond to an e-mailed request for comment on the ComScore rankings.

The Bloomberg Russia-US Index fell to 104.84 yesterday in New York, while the Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, declined 0.3 percent to $30.65. The RTS Volatility Index, which measures expected swings in futures, decreased 2.8 percent to 19.7 points in Moscow today.

Ruble Futures

Futures expiring in March on the ruble show the currency strengthening 0.1 percent to 30.231 per dollar, after the ruble slid 0.5 percent to 30.088 against the dollar yesterday. The Russian currency was 0.1 stronger at 30.0485 per dollar today.

Oil, which together with natural gas makes up about 50 percent of Russian budget revenue, gained 0.2 percent to $96.83 a barrel today in New York. Brent oil for March settlement rose 0.7 percent to $117.53 per barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s chief export blend, increased 0.1 percent to $115.15.

American depositary receipts of Moscow-basedSberbank fell 1.1 percent to $14.27 in New York yesterday, the lowest close since Jan. 25. The lender, which reported a 9 percent jump in January net income today, lost 1.4 percent in Moscow to 105.40 rubles, or $3.51.

Sberbank said in a statement yesterday that its depositary receipt program had reached its limit.

Bank of New York Mellon Corp. halted Sberbank’s DR program under, where investors convert local shares into foreign-traded stock, according to a statement dated Feb. 5. DRs can only account for 25 percent of a company’s shares and 50 percent of its listed shares, under Russian regulations.

United Co. Rusal, the world’s largest aluminum producer, rose 2 percent to HK$4.54 in Hong Kong, rising for the first time in eight days.

Before it's here, it's on the Bloomberg Terminal.