Yahoo! Inc.'s [YHOO] first-quarter earnings topped expectations, but may not be high enough to induce Microsoft Corp. [MSFT] to raise its $43 billion offer to acquire the Internet company.

Yahoo! on Tuesday, April 22 reported Ebitda of $433 million on revenues of $1.35 billion, compared with analyst forecasts of $424 million in Ebitda on sales of $1.325 billion. Yahoo! in January projected revenues for the period of $1.28 billion to $1.38 billion. It also reaffirmed full-year revenue guidance of between $5.35 billion and $5.95 billion, which was viewed as disappointment.

Yet while the financial results exceeded Wall Street forecasts, expectations for even stronger results had been heightened of late in part because Yahooo! had reaffirmed guidance and because Google Inc. reported strong first-quarter results last week.

"This was the equivalent of a lot of foreplay and very little action," said Ashkan Karbasfrooshan, a Yahoo! shareholder and president of technology industry blog WatchMojo.com who has been critical of Yahoo! since Microsoft made its acquisition offer Feb. 1. "They raised the expectations so much that it was a bit of flop. In the end, there wasn't that much upside. Microsoft is celebrating right now--they can leave the offer at $31."

Ahead of Yahoo!'s financial report, Sanford C. Bernstein analyst Jeffrey Lindsay said the company would need to show a double-digit increase in revenues, versus the $1.18 billion it reported in the year-ago period, for the report to not be seen as a disappointment. At $1.35 billion, Yahoo!'s revenues rose 14%.

For Yahoo! the stakes are high as it attempts to thwart Microsoft in its takeover attempt or show that it's worth more than the software giant's $31 a share cash and stock offer. Even ahead of the report, others who have followed the day-to-day travails of the proposed acquisition were putting less stock in the results. They argued that Yahoo! had strong incentive to burnish its numbers to prove to both Microsoft and shareholders that it's worth more than the current offer price. Indeed, Microsoft CEO Steven Ballmer on Tuesday said the results would not "affect the value of Yahoo! to Microsoft."

But Ballmer did not say what that value is, leaving open for interpretation whether it would consider raising its offer. Yahoo! has thrown up its own roadblocks in the proceedings. It is nearing the end of a two-week trial period with Google Inc. [GOOG] to outsource its search advertising and results have reportedly been encouraging enough for the companies to weigh a long-term arrangement. In its conference call to discuss the earnings, Yahoo! president Susan Decker said it was premature to say what kind of partnership it could reach with Google. Though a permanent agreement would not preclude Microsoft from acquiring Yahoo!, it could serve as a bargaining chip to elicit a higher offer.

Yahoo! also has floated a potential move to buy AOL as an alternative to a deal with Microsoft, though Yahoo! will have a tough time convincing shareholders that a deal with the Time Warner Inc. unit is more desirable than an acquisition by Microsoft. Tuesday's earnings report comes just days ahead of the April 26 deadline set by Microsoft for Yahoo! to reach an amicable agreement on a deal. -- David Shabelman