Jerry Yang today hailed Yahoo!'s "extraordinary" Q1 results, citing the besieged firm's ability to execute, against a backdrop of economic uncertainty and Microsoft's unwelcome bid to buy the company.
And extraordinary they were, as the Yahoo! CEO claims, with net income jumping massively to $542m, or 37 cents a share (Net income, Q1 '07: $142.4m). But performance and execution had nothing to do with the uplift - which came courtesy of a $401m non-cash equity gain. This was a recognition of the value crystallised through last year's IPO of Alibaba.com, the Chinese ecommerce firm in which it has an indirect stake through a 40 per cent ownership of Alibaba, the parent company.
Back at Yahoo!, earnings from operations fell year over year to $120.6m (Q1 07: $169m).
Other financial metrics were pretty good too. Gross revenue was $1.8bn, up nine per cent on last year (Q1 07: $1.67bn). Net revenues, excluding traffic acquisitions costs, climbed 14 per cent to $1.35bn (Q1 07: $1.18bn).
But is this enough to fend off Microsoft?
On February 1, Microsoft offered $44.6bn in cash or shares for Yahoo!. Since then the value of the offer has declined, thanks to a drop in Microsoft's own share price. Yahoo! has scrambled to find a white knight, either to merge with (AOL), to sell its inventory (Google) or to buy the company outright (News Corp.). None of the company's would-be suitors can match Microsoft's money. Not even Google. And Yahoo! shareholders appear to have little appetite in seeing their company remain independent.
In the earnings conference call today, Yahoo!'s Yang said the company was "open to all alternatives, including a sale to Microsoft". But he re-iterated the company's belief that the Microsoft bid is too low-ball for a "one of a kind global franchise". He characterised the firm's search for strategic alternatives to Microsoft as "expeditious".
Microsoft shows no signs yet of offering a better price. The original offer incorporated a big premium to facilitate a friendly and quick takeover, Microsoft boss Steve Ballmer declared earlier this month. In an open letter to the Yahoo! board, he voiced frustration with what Microsoft sees as dilatoriness and refusal to come to the negotiating table.
Microsoft has imposed a deadline on the Yahoo! board to agree a deal by the weekend. Or it will kick off a proxy battle to install its own directors.
Let's see what next week brings. ®