Strong Yahoo financials will not see off Microsoft

Yahoo's better than expected first-quarter results will not help it fight off Microsoft's hostile takeover bid, experts reported today..

"This first-quarter performance was neither too hot nor too cold, and that has probably set the scene for a prolonged battle for Microsoft in its bid to takeover Yahoo," said Aleksandra Bosnjak, lead analyst at StrategyEye Digital Media.

"By delivering earnings and revenue that surpassed market estimates, Yahoo added more uncertainty in terms of finding the right acquisition price."

Microsoft's initial bid was US$44.6bn or US$31 per share. However, in evaluating any performance, Bosnjak believes that "measuring more is easy but measuring better is hard".

"In Yahoo's case, the growth in the first quarter is not organic and comes from Alibaba, its Chinese investment, which is why Chinese philosophy comes to mind," she said.

"It is all about establishing harmonious relationships, and finding a balance between the present and the future."

Bosnjak noted that, after two months of talks, Yahoo and Microsoft need to find their own compromise to end the negotiating stalemate.

"Regardless of its earnings results, Yahoo is in a position of weakness and it will have to get in bed with somebody," Bosnjak added.

"It is in Yahoo's interest to resolve this bid as soon as possible since failing to find a solution means, ultimately, no progress.

"In addition, there are pressures on Microsoft and Yahoo to combat Google, which is now far better positioned in every single aspect of online competition than either of them."

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