Yahoo! soaring profits unlikely to affect Microsoft bid

Yahoo! has reported a nearly fourfold increase in net income to $542m (£272.6m), due solely to gains from its share in Chinese portal AliBaba.

Despite reports that the startling income gains could help the embattled internet business fend off Microsoft's aggressive takeover approach, Yahoo!'s results show its operating income has fallen 28% year on year to $120.6m. It was the $401m net non-cash gain related to Alibaba Group's initial public offering of Alibaba.com that boosted Yahoo!'s overall numbers. While revenues increased by 9% year on year to $1.82bn, which was better than analysts predicted, the company's share price was virtually unchanged yesterday at $28.54. Coming up on Saturday is the deadline imposed by Microsoft for Yahoo! to enter into talks about its $44.6bn (£22.6bn) offer, before Microsoft goes hostile by taking its offer directly to Yahoo!'s shareholders.  Yesterday, Microsoft's chief executive Steve Ballmer pre-empted Yahoo!'s results and said they would be irrelevant to the amount his company was willing to pay.

He said: "We think we can accelerate our strategy by buying Yahoo! and will pay what makes sense for our shareholders. I wish Yahoo! all the success with its results, but it doesn't affect the value of Yahoo! to Microsoft."

Yahoo! is understood to still be in talks with News Corp and AOL over finding an alternative to accepting Microsoft's approach. However, after months of talks a deal is yet to emerge. Jerry Yang, co-founder and chief executive of Yahoo!, told analysts last night the results proved its recent efforts to change strategy were "starting to pay off". He added: "Our board and management team continue to be open to any and all alternatives, including a Microsoft deal. If you take only one thing away from this brief discussion I hope it will be that our board and management are committed to choosing a path to maximise stockholder value, and will not enter into any transaction that does not recognise the full value of this company."