Yahoo Inc. delivered first-quarter results that surpassed analysts' modest expectations, but the performance might not be enough to fortify the Internet pioneer's defense against Microsoft Corp.'s takeover bid.
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Most of the first-quarter improvement stemmed from a one-time gain of $401 million generated by Yahoo's stake in the parent company of Alibaba.com, a leading e-commerce site in China.
If not for the Alibaba windfall, Yahoo would have earned 11 cents per share comparable to its profit at the same time last year, on an apples-to-apples basis.
The results were 2 cents above the average estimate among analysts surveyed by Thomson Financial.
Revenue climbed 9 percent to $1.82 billion.
After subtracting commissions paid to Yahoo's advertising partners, the revenue totaled $1.35 billion just $30 million ahead of analysts' average projection.
Perhaps even more importantly, Yahoo didn't raise its revenue outlook for the remainder of year.
That could be good news for Microsoft, which has been betting that its takeover bid would become irresistible if Yahoo can't substantially accelerate its growth amid the decaying U.S. economy.
Microsoft has threatened to oust Yahoo's board if the 10 directors don't accept the current offer Saturday, but that risky maneuver known as a proxy contest could extend the current impasse into July.
The cash-and-stock bid, valued at $44.6 billion when it was first made nearly three months ago, is now worth about $43 billion, or $29.88 per share.
Without specifying a precise price, Yahoo has maintained it's worth more to Microsoft even though its stock price had fallen below $20 at the time of the bid.
"Yahoo is beginning to realize the benefits of the very substantial and deliberate long-term investments we've made to capitalize on the opportunities ahead," said Jerry Yang, the company's co-founder and chief executive.
Yahoo shares edged up 4 cents in extended trading after dipping a penny to finish Tuesday's regular session at $28.54.
