Yahoo grows earnings and revenue in first quarter

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Yahoo grew its revenue and net income and exceeded Wall Street’s expectations for both categories during its first quarter of 2008, arguably one of the closest-watched earnings reports of its history, as it tries to fend off an acquisition attempt by Microsoft.

Revenue came in at $1.818 billion, up 9 percent compared to 2007’s first quarter. Deducting the commissions paid to Web sites in its ad network, Yahoo’s revenue was $1.352 billion, a 14 percent increase and above the $1.324 billion consensus expectation from financial analysts polled by Thomson Financial.

Net income was $542 million, or $0.37 per share, compared to $142 million, or 10 cents per share, in 2007’s first quarter. That includes a net noncash gain of $401 million from’s initial public offering.

Pro forma net income, which includes one-time items, was $150 million, or 11 cents per share, slightly down from net income of $154 million, or 11 cents per share, in 2007’s first quarter, but topping analysts’ consensus expectation of 9 cents per share.

Yahoo’s directors and managers have been arguing strongly against Microsoft’s acquisition bid, announced almost three months ago and now valued at around $42 billion, saying it undervalues the company and is not in investors’ best interest.

Yahoo’s management has been actively seeking alternative deals that will allow it to build a case against Microsoft’s bid, but so far hasn’t come up with anything concrete.

The first-quarter financial report and management conference call will likely be closely scrutinized and, depending on how satisfied or dissatisfied investors are with the results, the report is likely to have a significant effect on Yahoo’s tussle with Microsoft.

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