Yahoo sees growth up, argues for higher Microsoft bid

New York: Yahoo Inc said on Tuesday it is on track to meet its 2008 earnings forecast and gave a rosy revenue view for the next two years as it makes a case for a higher takeover price from Microsoft Corp.

The remarks allayed concerns about Yahoo's financial performance this quarter, since it would have less room to negotiate with Microsoft if those numbers fell short, analysts said. Yahoo, whose shares rose as much as 7 per cent, will take its case to investors in meetings this week.

"They're putting this out to say we're not falling apart," said Martin Pyykkonen of Global Crown Capital. "They're putting very general, pie-in-the sky comments out there that, while not impossible ... look kind of aggressive."

Microsoft has not yet sweetened its $42 billion bid, and a recent Reuters poll showed many analysts expect the software maker to prevail in the Yahoo takeover without doing so.

But Yahoo, which reaffirmed its financial forecasts for the first quarter and full-year 2008, argued on Tuesday that its acceptance of an offer would immediately propel several key businesses for Microsoft.

"Yahoo provides meaningful strategic value and warrants a significant acquisition premium above its equity value," the company said in an investor presentation filed with the U.S. Securities and Exchange Commission. Microsoft had no immediate comment.

Yahoo believes it can nearly double operating cash flow to $3.7 billion in 2010. It forecast a rise in revenue, excluding payments to affiliates, to $8.8 billion from an estimated $5.7 billion this year.

"Yahoo is positioned for accelerated financial growth -- we have a powerful consumer brand, a huge global audience and a highly profitable operating model," Yahoo co-founder and Chief Executive Jerry Yang said in a statement. Yahoo said it first presented the three-year view to its board on December 2007, well before Microsoft made its offer public on February 1.

The forecasts are based on revenue and cash flow growth that outpace median estimates from six analysts for both 2009 and 2010, Yahoo said in its filing. Key growth areas for the company include Internet display and video advertising, where it expects $1.9 billion in added revenue over the next three years, excluding payments to affiliates.