Yahoo results better, not seen moving Microsoft

By Eric Auchard

SAN FRANCISCO (Reuters) - Yahoo Inc posted a better-than-expected quarterly profit on Tuesday but failed to do well enough to convince many on Wall Street that Microsoft Corp needs to raise its takeover bid.

Yahoo left its revenue outlook for the year unchanged, and its shares ticked down half a percent in extended trading.

"Microsoft is breathing a sigh of relief," said Jim Friedland, analyst at Cowen & Co. "Even though these are solid results, given long- and short-term challenges, there's been no overall shift in Yahoo's business."

"Microsoft's offer is still the best offer on the table," he said, adding that the software maker could "modestly raise" its $43 billion cash-and-share bid just to close the deal.

Mike Binger, fund manager at Thrivent Financial, which owns shares in both Microsoft and Yahoo, said: "I would say at this point Microsoft would stay their bid."

Buoyed by a large gain on a stake in China's Alibaba.com Ltd, Yahoo's first-quarter net income rose to $542.2 million, or 37 cents per diluted share, from the year-ago quarter's $142.4 million, or 10 cents per diluted share.

Excluding one-time items and stock compensation costs, the beleaguered Internet company reported a profit of $150 million, or 11 cents per share.

On that basis, Wall Street on average was looking for a profit of 9 cents per share, according to Reuters Estimates.