Google earnings surprise may give Yahoo leverage

An earnings windfall for Google Inc should benefit rival Yahoo Inc in buyout talks with Microsoft Corp, as investors view the results as proof of a robust online advertising market.

Yahoo is entering a critical week as it prepares to report quarterly results on Tuesday and faces a Microsoft-imposed deadline to accept the 43 billion offer. The software maker has cast doubt on whether Yahoo is even worth that much with a weakening US economy and general slowness in the ad industry. Google8217;s strong showing may help Yahoo stand firm on a higher takeover price on hopes that Web marketing is more durable in a downturn.

8220;The one thing that can really change Microsoft8217;s thought process on valuation is if they can come in with good results,8221; said RBC Capital Markets analyst Ross Sandler. 8220;We think there is a decent likelihood of upside from Yahoo this quarter.8221; Yahoo forecast first-quarter net revenue at 1.28 billion to 1.38 billion. Analysts, on average, are expecting profit of 9 cents per share, excluding special items, on revenue of 1.32 billion. Google on Thursday reported a better-than-expected profit and revenue growth of 42 per cent.