Yahoo Posts Earnings, Battle with Microsoft Continues

Yahoo posted its first quarter earnings for 2008 on Tuesday, exceeding expectations by a small margin. The company posted a 9 percent increase in revenue for a total 1.81 billion dollars. This would seem to give strength to the Internet portal in its ongoing confrontation with Microsoft, which is hoping to buy Yahoo and become a stronger online competitor against Google. (Source: nytimes.com)

Yahoo CEO Jerry Yang made claims earlier in the month that Microsoft's current offer of $31 per share substantially undervalues the company, and refused to sell at that price.

While Yang now has some evidence to back up his claims, his company's rival is unmoved. Shortly after the earnings report came out Microsoft CEO Steve Ballmer said, ""I wish Yahoo all the success with its results, but it doesn't affect the value of Yahoo to Microsoft." (Source: reuters.com)

This could suggest that Ballmer will begin a proxy contest to install a new Yahoo board that is more amenable to a Microsoft takeover, as he promised to do earlier this year. A deadline of April 26 was originally set for Yang and his board to accept the offer, but Yahoo quickly responded and refused to accept for a second time.

This would seem to suggest that as soon as this weekend Microsoft could set its proxy plans in motion. However, later Tuesday Ballmer released another statement saying that if the two companies could not come to an agreement, Microsoft would be willing to walk away from the takeover offer.

That most certainly gives some comfort to Yang, who has been trying to find a way to maintain his company's independence.  However, it may scare major Yahoo shareholders into forcing a deal with Microsoft. If, however, a proxy contest begins it may drag on until the Summer when Yahoo is required to hold its next shareholder meeting.

Meanwhile, online advertising leader Google continues to fortify its position. Global Crown analyst Martin Pyykkonen told the Associated Press, "If you want to make money off this [fight between Microsoft and Yahoo], buy Google."