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What's Yahoo CFO Blake Jorgensen so happy about? Try Yahoo's first quarter earnings on for size. Widely expected to surpass Wall Street expectations, Yahoo did not disappoint, reporting $1.35 billion in first quarter revenues after traffic acquisition costs, a 14 percent percent increase over the first quarter 2007. Still, Microsoft CEO Steve Ballmer said earlier today that positive earnings would not cause him to raise Microsoft's $31 per share offer for Yahoo. Yahoo CEO Jerry Yang, president Sue Decker and Jorgensen respond in our live coverage of Yahoo's analyst conference call, below.

2:02 Still waiting for our friends CEO Jerry Yang, CFO Blake Jorgensen and president Sue Decker to join us on the call. Meanwhile, I'm wondering if Yang will heed one Yahoo search marketer's call for more integration with Google.

2:04 The gang is all here: Yang, Decker and Jorgensen. First, though, a nice long disclaimer.

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2:08 Yang: These results are are the more remarkable considering the economy and Microsoft's proposal. "Our strategy and investments are beginning to pay off." We have the capital we need to substantially grow revenue.

2:10 Yang: Let me talk about Microsoft. Microsoft's proposal substantially undervalues Yahoo and our one-of-a-kind global brand. Our board and management team continue to be open to any and all alternatives, including a sale to Microsoft. Take one thing away: our board and management are committed to maximizing shareholder value.

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2:12 Yang goes over highlights from the quarter: We acquired Maven and previewed AMP from Yahoo. (Insiders tell us AMP needs more cash and manpower if it's going to live up to Yang's expectations.)

2:51 Yang says closing the gap in search marketing will depend on Panama. He doesn't mention the Google trial. He says Yahoo's greatest opportunity is in display advertising. The economy's weakness will drive marketers online, he says.

2:54 Question: Asian assets are a big part of Yahoo's value. What are they hypothetical things you could do with them? Yang's answer: We can't talk about our alternatives. We think the position we've achieved in China and Japan are second to none. It won't be able to be recreated in any form. We think of that as a scarcity value. We also think it's a way to provide transparency.

2:15 The call goes to Decker. Decker highlights progress in Q1: Giving users a consistent Yahoo, opening to third-parties and creating social connections. "We're not trying to be another social network."

2:19 Decker: We have a strong number 2 position in search. Last summer, we focused on catching up to the leader. Now we're going for differentiation. Our next advance will be Open Search, which we call search monkey. We'll allow third parties to improve our search. ComScore reports that Yahoo's search relevance rate was 72 percent versus the previous market leader's 69 percent.

2:23 Decker: Yahoo Buzz has 120 publishers already. "With more coming in every week." This model is self-reinforcing. "With our enormous scale this should make us the partner of choice for publishers." Video on Flickr has already quadrupled videos by Yahoo users across the entire Yahoo network.

2:25 Decker: Panama continues to make gains in click-through rates and user-experience. Search revenue was up 20 percent in the US, 15 percent Internationally. We have made progress on click-yield. The price per click upside is still significant. We believe we can make steady improvements. We just launched minimum bid changes, providing smaller business opportunity. The $.10 minimum bid is gone. This will help us achieve our three goal of 15 percent RPS gains.

2:27 Decker on outsourcing to Google: We see tremendous value in being a principle player in search and display. We've narrowed the search monetization gap. There may be more than one way to continue to do that. We've tested Google. That may continue.

2:30 Decker talks about Yahoo AMP: a web-based hosted application. The platform will standardize how operations are handled. We will "begin rolling it out in Q3." This should lead to a "meaningful" boost in revenues. Again, sources tell us AMP needs a lot more cash, hardware and engineering manpower if it's going to meet these expectations.

2:32 Jorgensen takes the call. Spouts numbers. Find them here.

2:34 Jorgensen said Yahoo spent $14 million for advice on how to deal with Microsoft.

2:34 Owned and operated search was up 15 percent. Display was up 16 percent. Finance, travel and retail advertising is down, due to a softening economy. Overall, Yahoo is fine.

2:43 Jorgensen says Yahoo's Q2 outlook ($1,730 - $1,930 million) excludes layoff costs and costs associated with Microsoft's bid.

2:44 The call goes back to Yang. Time for questions.

2:47 Question: What kind of economic outlook did you bake into your outlook? Street estimates expect lower online advertising growth. Answer, from Jorgensen: We believe the plan is based on market growth and Yahoo's growth relative to that.

2:48 Question: We've noticed that TAC is going down as a percentage of revenues. Are you getting better deals? Jorgensen: TAC decreased around 4 percent. There is upward pressure on TAC-rates as competition gets tougher. Competitors are also building out display networks. We're disciplined and you're seeing that.

2:50 Question: How much is Right Media helping remnant advertising? And which segments are weak and why? Decker's answer: We call remnant class 2 or non-guaranteed advertising. We are seeing significant growth in class 2. Revenues are close to doubling. Jorgensen: Some of the stronger categories in search are also strong in display.

2:51 Question: Owned and operated search is up. You just removed the minimum bid. Correlated? Decker's answers: Panama was up only 10 percent year-over-year this quarter because we're competing against Panama's first quarter now.

2:56 Question: How well will AMP work with other ad networks? Would it still work if you're using Google search marketing? Decker's answer: It's build on the RIght Media exchange, so any network in that exchange would work with it. As for the second question: AMP is a primarily a display advertising platform. It also involves content-matching advertising, which is sometimes considered search advertising. Over time, search will be integrated fully into AMP.

2:58 Question: International growth was up 7 percent. Was there a one-time event to drive this? And how much did Microsoft impact growth? Jorgensen's answer to the first question: There was not a one-time event. There's just more pressure on affiliates. Yang answers the second: I think our business performed robustly. We're keeping an eye on the ball. It's hard to say any impact at all. We ended up ahead of where we thought we would be.

3:00 Question: Please tell us more about the weak advertising categories. Decker's answer: We think the economic downturn makes online advertising more attractive.

3:03 Question: Do you think you're gaining ground on search monetization? And why is your year-long guidance higher? Decker's answer: We thought the gap was close to 100 percent when we launched Panama. In US sponsored search, we feel that we've narrowed the gap by 30 percent. There's 60 to 30 percent remaining. Jorgensen answers the second: We are seeing cost-savings.

3:05 Question: The focus seems to be on monetizing the ad inventory you already have. What are you doing to grow your inventory? Yang's answer: We need both inventory and better monetization. There's a higher focus on monetization because it's a very nascent stage. But we continue to invest in inventory on and off the network. We've seen robust growth in pageviews. Bye.