The economic downturn has jeopardised hopes that internet search service Ask Jeeves will break into profit by the end of the year.

The firm, announcing underlying losses of $9.9m for the April-to-June quarter, said that because of the difficulty in predicting market conditions, it was "no longer comfortable" forecasting underlying profitability in the last three months of 2001.

"Our goal remains to continue to lower our break-even point and to bring the company to pro forma profitability in the fourth quarter," said Steve Sordello, the firm's chief financial officer.

"But we will not do so at the expense of servicing our customer base or the development of our key products."

Ads shake-up

The company, which reported revenues of $16.7m for the quarter compared with $19.1m a year before, admitted "revenue loss from disappearing dotcom customers and the price deterioration of banner ads".

But chief executive Skip Battle said the company, which laid off a quarter of its staff in December, was managing costs "effectively".

Current operating costs are, when rounded up to an annual rate, $65m less than they were in the last three months of 2000.

Ask Jeeves is also investing "prudently" in promising services, including a premium priced ad product which since its launch in the spring has achieved sales growth of 40% a month, Mr Battle said.

"With the new management team we now have in place, [and] the continued success of our ad products... we expect renewed revenue growth after the [July to September] quarter," he added.

The firm, which ended last year with reserves of $105m, expects to leave 2001 with a position of about $60m.

Wall Street reaction

The second quarter loss, which compared with a $25.9m deficit a year before, was some 20% lower than Wall Street analysts had forecast.

But the figures, released after the close of US markets, nonetheless failed to support Ask Jeeves shares in after hours trading.

Ask Jeeves shares, which closed at $1.56 on Thursday, stood at $1.30 in after-hours activity, following the release of earnings.

The stock hit an all-time high of $169.