Yahoo report filled with Microsoft subtext

Updated 2:15 p.m. PDT, with comments from CEO Jerry Yang on the conference call.

The Microsoft takeover effort was both between the lines in Yahoo's earnings report and on the bottom line itself.

The bottom line part was Yahoo's notation that it spent $14 million on outside advisers related to both Microsoft's bid and exploring other alternatives, as well as for litigation costs related to the bid.

The between the lines stuff was in Chief Executive Jerry Yang's comments. In some ways, his words sounded like more of the same.

"As outlined in our investor presentation, we believe we can significantly accelerate our revenue growth, return to our historically high margins, and double our operating cash flow by 2010," he said in a statement. "This quarter's solid performance underscores the fact that we are executing on that plan."

However, I read his words more as a pitch for a higher price than as a real justification for his go-it-alone approach. He talked about the strength of the current strategy, but notably didn't use the words "independent company" anywhere in his words.

That suggests to me that perhaps Yang has accepted the fact that, either by combining with Microsoft or perhaps AOL, Yahoo's independent days are coming to an end.

Update: Yang practically confirmed as much on the call in a brief discussion of the Microsoft proposal. Here were his key points:

Although he noted that Yahoo rejected Microsoft's initial offer, he said "our board and management continue to be open to any and all options, including a sale to Microsoft."

Yang said that the company is still "exploring a number of strategic alternatives."

He didn't say Yahoo didn't want to sell itself, saying merely that the board and management are committed to choosing whatever option maximizes shareholder value. Adding to the sense that this was mostly bargaining for a higher price, he said the company "will not enter into any transaction that does not recognize the full value (of Yahoo)."