Web giant's first quarter exceeds expectations

Yahoo’s more worried about the economy than a Microsoft takeover.

So far, however, the Netco has yet to feel a major fallout from the country’s economic woes. On Tuesday, the search giant posted first quarter earnings that exceeded Wall Street expectations, in part due to growth in the display ad sector.

Yahoo’s credible perf followed an even stronger showing by rival Google last week. Those earnings did much to reassure Wall Street about the strength of the online ad market (Daily Variety, April 18) in the economic downturn.

However, Yahoo has a challenging road ahead, and chief exec Jerry Yang reiterated Tuesday that the company remains open to purchase by other parties including Microsoft. But he stressed to Wall Street analysts that the board “will not enter into any transaction that does not recognize the full value of the company.”

In fact, he used the Netco’s perf to make the case for the company’s decision to reject Microsoft’s bid, valued at $44.6 billion.

During the first quarter, Yahoo earned $542.2 million, more than triple its profit of $142.4 million during the same period last year, but most of that bump came from a $401 million non-cash gain from Alibaba.com, a Chinese site that went public last year. Revenue rose 9% to $1.82 billion.

Microsoft made its cash and stock bid nearly three months ago. Steve Ballmer, Microsoft’s chief exec, has insisted that the tech giant would not sweeten the bid.

Yang downplayed the impact of Microsoft’s bid on its perf last quarter when quizzed on the subject.

“We obviously are watching the economy a lot more than Microsoft reaction,” he said.

Yahoo’s display ads grew more than 25% during the quarter. The company is conducting a test with Google for the larger company to handle some of Yahoo’s ads, but prexy Sue Decker said it was premature to speculate about the outcome.

Citing some of Yahoo’s ad gains, Yang stressed his conviction that the Netco would avoid major economic fallout from the downturn as more ad coin shifts online.

“We have a very diverse advertising base and expect that ad budgets will continue to move online,” Yang said. “We believe we can achieve significant growth for the next three years and we believe the results of the first quarter demonstrate that.”

Yahoo ended March with 13,800 employees, down from 14,300 workers at the end of 2007. The company jettisoned more than 1,000 workers during the first quarter, but offset some of the purge by hiring about 600 new employees.

(The Associated Press contributed to this report.)

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