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Yahoo, Microsoft, and the tailwind from Google

Google has turned in strong numbers for the first quarter. That could well have implications for the Microhoo saga as Yahoo gets ready to report its earnings.

With Google blowing past Wall Street's numbers for the quarter Thursday, expectations may rise for Yahoo, which reports its first-quarter results next week.

Yahoo earlier told Wall Street that it expects to post revenue within its previously forecast range of $1.28 billion to $1.38 billion.

The question on investors minds is whether Yahoo on Tuesday will report results that are on the low end of the range, or the high end. Expectations for hitting the upper end may have just increased, given Google's performance for the quarter.

And as has been reported a number of times, if Yahoo hits the high end of its range and issues a strong forecast, it may bolster its argument that Microsoft should pony up more than its initial cash-stock bid, valued at $31 a share. (For full coverage, see "Microsoft's big bid for Yahoo.")

Should Yahoo hit the low end of its range, especially in light of Google's financial results, Microsoft may have a stronger argument for keeping its offer where it is, say Wall Street soothsayers.

Based on a consensus of Wall Street analysts, Yahoo is expected to report net income of 9 cents a share on revenue of nearly $1.33 billion, according to Thomson Financial.

Although Google's share soared as much as 12 percent in after-hours trading to tip past the $500-a-share range, Yahoo climbed less than 1 percent to $28.26 per share. In regular market hours, Yahoo ended the day down slightly at $28.03 a share.

While waiting for Yahoo to decide whether it will enter into a friendly merger or tempt fate with a proxy fight, Microsoft has not been sitting idle.

Microsoft has hired Bryan Cave Strategies to lobby its case with federal regulators, according to an Associated Press report. The software giant is hoping lobbyists will aid its efforts in getting regulators to give a nod to a Yahoo merger, proxy fight or no proxy fight.

While it's not clear whether Yahoo has taken similar action and hired lobbyists over the Microsoft bid, Google is not resting on its laurels, according to the AP story. Google has hired the Franklin Square Group to aid with "competition issues in the Internet industry," the AP cited from a disclosure form Franklin filed with the Senate public records office.

And as the parties next week head toward the last leg of a three-week deadline Microsoft issued to Yahoo to do a deal, Microsoft CEO Steve Ballmer hasn't lost his sense of humor.

As he addressed a crowd of nearly 2,000 people at a Seattle technology conference Thursday, he asked the group how many relied on Yahoo as their main search engine, according to a Reuters report.

When only a handful of hands went up, according to the Reuters report, Ballmer quipped: "Wow! We offered 31 bucks a share."