Microsoft talks tough on Yahoo, reports 11 pct profit drop

Before diving into quarterly results, Microsoft Chief Financial Officer Chris Liddell spent a few minutes on a conference call with analysts reiterating the company's stance on its stalled bid to buy Web portal Yahoo.

"Unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives," he said. "These alternatives clearly include taking an offer to Yahoo shareholders or to withdraw our proposal and focus on other opportunities."

Yahoo's board rebuffed the February offer then worth $44.6 billion saying it undervalued the company. The bid's value has fluctuated with Microsoft's share price ever since, settling at $44.06 billion at the close of trading Thursday.

Liddell said Microsoft will issue an update on the Yahoo situation next week, once the Saturday deadline that it set almost three weeks ago has passed.

Microsoft's net profit for the three months ended March 31 fell to $4.39 billion, or 47 cents per share, from $4.93 billion, or 50 cents per share, in the same period last year, the company reported.

Revenue edged up to $14.45 billion from $14.4 billion in the year-ago quarter.

The results came in ahead of Wall Street's expectations on both measures. Analysts surveyed by Thomson Financial forecast a profit of 44 cents per share on $14.4 billion in sales.

"Despite a difficult economic environment, it was a very good performance," Liddell said in an interview.

But investors, chewing over the company's guidance and a drop in sales in the divisions that produce Windows and Office, sent shares down $1.60, or 5 percent, to $30.33 in after-hours trading. Earlier in the day, the stock had gained 35 cents, or 1.1 percent, to close at $31.80.