Yahoo on Tuesday reported profits soared to 542 million dollars in the first three months of the year

Yahoo on Tuesday reported profits soared to 542 million dollars in the first three months of the year and renewed promises that the struggling US firm is bound for richer times.

The financial results and emphatic assurances failed to sway analysts convinced that the pioneering Internet firm won’t escape the grasp of US software giant Microsoft.

Microsoft set a Friday deadline for Yahoo to accept its 44.6 billion dollar (27.86 billion euro) offer or face a “proxy fight” in which Microsoft tries to replace Yahoo’s board of directors.

“Yahoo has to make the hard decision of whether to call Microsoft’s bluff,” said Silicon Valley analyst Rob Enderle.

“And if Microsoft isn’t bluffing and this goes hostile, it is going to be expensive for both companies.”

Since Microsoft announced its takeover offer in February, Yahoo has feverishly launched new services and gone forward with acquisitions it contends position it to cash in on the flourishing online advertising market.

“The simple truth is that Yahoo was asleep at the wheel. Now somebody lit a fire under their butt,” IDC analyst Karsten Weide told AFP.

“The stuff they are doing is interesting it’s just that it takes more time to produce results. The problem for Yahoo is they don’t have time.”

The robust earnings report includes 401 million dollars Yahoo took in from an initial stock offering by Chinese Internet firm Alibaba, in which it has a stake.

If the one-time influx of Alibaba cash is deducted, Yahoo’s earnings are modest and far short of the blockbuster performance analysts believe is needed to fend off Microsoft.

“We believe we can significantly accelerate our revenue growth, return to our historically high margins, and double our operating cash flow by 2010,” said Yahoo chief executive Jerry Yang.

“This quarter’s solid performance underscores the fact that we are executing on that plan.”

The profit amounted to 11 cents a share, better than the nine cents per share expected on Wall Street.

AFP report