By Yi-Wyn Yen

A slowing economy hasn’t fazed Amazon.

The online retail giant beat the Street on Wednesday with sales that soared 37% to $4.13 billion for the first quarter. Amazon (AMZN) also reported profits of $143 million, or 34 cents per share from the same period a year ago, which came in ahead of analyst estimates of 32 cents a share on revenue of $4.08 billion.

Despite fears of an economic meltdown, Amazon raised its 2008 sales forecast slightly, to between $19.1 and $20 billion, which would be an increase of about 30% over 2007. Specifically, Amazon expects to see growth in sales from third-party retailers that sell on the site and make up about one third of its revenues, as well as from Amazon Prime, a $79 service that guarantees free two-day delivery on every purchase.

Still, analysts grilled Amazon CFO Tom Szkutak about how a consumer slowdown might affect the company. Szkutak said he didn’t have a “lot of data points on the economy,” but that Amazon was focused a simple strategy: offer customers good selections at low prices. “It’s hard to predict what will happen,” Szkutak said. “We think that in this type of environment, customers want great value for down times and up times.”

Though revenues continue to surprise investors, Amazon’s operating margins – long a concern for Wall Street – have remained flat at 4.8% as the company invests heavily to expand its technology and its businesses abroad.

“They’re driving hard for growth,” says Jeffrey Lindsay, an Internet analyst with Bernstein Research. “What keeps surprising us is better than expected growth versus lower than expected margins.”

Investors have punished Amazon before for its disappointing margins, and this latest report was no different. Shares fell 5% in after-hours trading Wednesday.

By Scott Moritz, writer

Qualcomm (QCOM) isn’t seeing a slowdown in wireless apparently. The San Diego tech giant posted solid fiscal second quarter results and guided up for the current quarter.

The wireless standard bearer posted an adjusted profit of 54 cents a share, up from 50 cents a year ago, and 2 cents better than analysts predicted. Sales in the quarter rose 17% to $2.6 billion from $2.2 billion in the year-ago quarter. Analysts anticipated a $2.5 billion revenue performance.

“The fundamental drivers of our business remain strong, and based on the current business outlook, we are raising fiscal 2008 revenue and earnings per share guidance,” CEO Paul Jacobs said in a press release.

Looking ahead, Qualcomm expects a fiscal third quarter profit of 51 cents, directly in line with analysts expectations. Sales for the quarter are expected to remain flat at about $2.6 billion, well above analysts estimates calling for sales of $2.3 billion.

And as a sign that demand for more expensive smart phones is rising, Qualcomm forecast the average selling price of phones to jump to $223 in the fiscal third quarter from $215 last year.

For the full year, Qualcomm now expects sales to be around $10.2 billion that is up from previous guidance calling for $9.8 billion in revenue.  That compares with $8.8 billion last year. Analysts were looking for $9.9 billion in total sale for the year ending in September.

Qualcomm shares dipped 53 cents to $41.36 in after-hours trading Wednesday.

By Scott Moritz, writer

The yelling phase of the proposed Microsoft/Yahoo merger got a bit louder as Yahoo (YHOO) turned in good numbers ahead of the deal negotiation deadline.

In the wake of a solid first quarter performance from Yahoo Tuesday, Microsoft (MSFT) chief Steve Ballmer said his company was standing pat on its original $31 a share unsolicited takeover offer. Microsoft has given Yahoo until Saturday to come to the table with a counter proposal, or face a proxy battle.

“We know what Yahoo is worth to us. We offered a lot of money: $44 billion,” Ballmer said in Milan Wednesday, according to a Reuters report. “If their board thinks that’s fair, great. If not, we’ll move forward,” Ballmer said.

Ballmer is likely waiting to see what Yahoo does come Saturday — the end of the three-week period Microsoft gave Yahoo to consider its options. Microsoft has threatened to start a proxy fight if the two companies fail to come to terms. This would open up an ugly process where Microsoft takes its appeal to shareholders calling for the ouster of Yahoo’s top management and key board members.

Last week, Yahoo rejected the Microsoft bid for a second time saying the proposal undervalued the company. Yahoo also held discussions with Time Warner (TWX) about a deal involving a 20% stake to be held by Time Warner in exchange for AOL and a pile of cash for share buybacks.

But many analysts and investors favor a more amicable conclusion that seems to call for a slightly sweeter offer from Microsoft, either a price higher than $31 a share or an all-cash offer.

Yahoo’s earnings Tuesday, while far from dazzling, did show that the company is not deteriorating as quickly as Microsoft may have suggested. Both companies, however, continue to lose business to Google (GOOG) a point that industry observers say makes the Microsoft Yahoo merger a growing necessity.

The trouble for Yahoo is that it must convince Microsoft to outbid itself, says Darren Chervitz analyst with the Jacob Internet Fund, a big Yahoo investor.

It’s well known that Yahoo has long been losing Net search traffic to Google. And by passing on the acquisition of Facebook last year, they’ve done little to improve their competitive position, says Chervitz.

And for its part, Microsoft has gained very little traction on the Internet. Efforts like MSN mail and .Net haven’t exactly hit any jackpots. Meanwhile, Google has expanded into Microsoft’s software domain with word processing and other office applications available to users online for free.

An even bigger threat to Microsoft is Google’s push into wireless applications. The Google-sponsored Android project hopes to create an operating system for a new generation of mobile devices, a direct threat to Microsoft’s Windows Mobile system. Microsoft can’t easily afford to miss the mobile Internet opportunity, says Chervitz.

“Yahoo,” says Chervitz, “is the only acquisition that gets Microsoft into the game.”

By Yi-Wyn Yen

It’s time for Microsoft to sweeten the bid.

Hours before Yahoo (YHOO) beat easy quarterly estimates on Tuesday, Microsoft CEO Steve Ballmer said his company wouldn’t raise its $43 billion offer no matter how well Yahoo performed. Nevertheless, Ballmer must up the ante if Microsoft (MSFT) intends to get a deal done with Yahoo.

In a call with analysts Tuesday, Yahoo CEO Jerry Yang signaled that his company wasn’t interested in a deal unless his company was offered more money. Microsoft’s No. 1 takeover target has until Saturday to accept the bid that would buy out Yahoo at slightly less than $30 a share or else face a proxy fight.

It took Yang a mere five minutes into Yahoo’s highly-anticipated earnings call to let Microsoft know he wasn’t going to be the first to back down. For the millionth time, Yang said the deal “substantially undervalues” his company.

Then he threw the ball back into Microsoft’s court. “Our board and management team continue to be open to any and all alternatives,” Yang said, “including a sale to Microsoft.”

Surely, Ballmer, who was halfway around the world in Morocco to launch the company’s MSN portal, is weighing his options: Go hostile or throw a few billion more at Yahoo, which has twice rejected its original offer. “We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders,” Ballmer said before the earnings Tuesday.

On Wednesday, Ballmer let Yang know he wasn’t going to be bullied around. “We know what Yahoo is worth. We offered a lot of money,” Ballmer said at a conference in Milan, according to Reuters. “If their board thinks that’s fair, great. If not, we’ll move forward.” Likely the move will be to begin a hostile takeover Saturday. Microsoft has hired Innisfree M&A to help it oust Yahoo’s 10-member board.

On the call, Yang and president Sue Decker insisted that the company is headed in the right direction. Yahoo offered its latest numbers as a final defense to its shareholders that it’s worth more than Microsoft is offering. Yahoo posted earnings per share of 11 cents, beating analyst forecasts by 2 cents. Its revenues, which exclude money it shares with advertising partners, climbed 14% to $1.35 billion, $20 million ahead of the consensus. Yang highlighted Yahoo’s display advertising revenues, which grew 25% from a year ago, and praised the company for its satisfactory quarter, calling it “impressive” under the circumstances.

But let’s face it. Those estimates weren’t too difficult to beat given that analysts had started with such low expectations. Yahoo also didn’t change its guidance for the year on annual revenues of $7.2 billion to $8 billion, which analysts considered a weak forecast when it was issued in January.

Yang said the company is still exploring “strategic alternatives” as Microsoft decides its next move. Yahoo ends its two-week test using Google’s search advertising on Wednesday and the company is in talks with Fortune’s parent Time Warner (TWX) to strike a partnership with AOL.

Analysts argue that Yahoo is playing for time. “Yahoo puts in numbers slightly better than expectations and wants a little more time to pursue alternatives. It’s time Microsoft doesn’t want [them to have], which means they will have to increase their offer to get investors over,” says Youssef Squali, an analyst with Jefferies.

As Google continues to gain online advertising share, Yahoo and Microsoft continue to fight with one another and fall further behind. The best way to quickly catch up is to start with Microsoft raising its bid. Analysts have suggested that an offer between $31 to $35 a share will make the deal possible. “If I’m a Yahoo shareholder looking at Yahoo’s performance and Microsoft as a potential buyer, I would think Microsoft is going to come in and sweeten the bid,” Squali says.

Expect that to happen or things will start to get ugly fast.