Yahoo!'s Sucker Rally

Terry Semel is back is schmuck-ville. He telegraphed that things were going well at Yahoo!

Over the last three months, Yahoo!’s (YHOO) shares rallied 15% to over $32. After yesterday’s earnings disaster, the stock dropped 8% after hours to $29.48. The price was $28.99 at the beginning of the 90 day period. Yahoo! had given back almost its entire gain.

Much of the rally had to do with a presentation that Yahoo! made at an Advertising Age conference on March 21. "I’m totally all smiles," Semel said about Panama. He restated that Yahoo’s "intention is to close the gap and Panama is doing a great job." Semel must have had a sense at that point that the first quarter would not be all roses.

Semel also sounded upbeat three months ago. Back in January, on the company’s fourth-quarter earnings call, He promised that Yahoo! intended to "outpace the industry" in 2007 on display-ad growth. But on Tuesday, Semel said the company expects merely to keep pace with rivals.

With revenue forecast to be just over $1.2 billion in the current quarter, it is hard to say where the upbeat projections have gone.

Semel took the stock up. Wall St. took the bait. But now expectations have been gutted.

Shame on Semel.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.