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Yahoo!'s search pact with Microsoft, cost cutting and business growth helped boost the internet's second biggest search company in the first three months of 2010.

The company Tuesday announced net income jumped 163 per cent for the first three months to March 31 while earnings per diluted share were up 175 per cent to $0.22.

Revenue, though, was actually flat - growing a single per cent to $1.59bn.

To give you an idea of what kinds of currents are blowing through the economy now the US recession is generally agreed to be over, and Google has re-calibrated its ads engine, Google announced a 23 per cent leap in revenue to $6.77bn in the first three months of 2010.

The story behind Yahoo!'s numbers? Revenue from display advertising on Yahoo!-operated sites grew 20 per cent.

Separately, AdGooroo Tuesday reported a 12 per cent increase in Yahoo!'s number of first-page advertisers and also in total share of advertisers. The analyst said much of the growth came from outside the US.

Cost cutting in the past year or so helped Yahoo! report an 86 per cent increase in income from operations to $188m. In the first quarter of 2009 Yahoo! announced it planned to cut another five per cent of staff as revenue fell 13 per cent and net income 78 per cent.

Yahoo!'s first-quarter earnings for 2010 were also boosted by the sale of the Zimbra email business to VMware and the arrival of cash from Microsoft as part of a search pact.

Without VMware and Microsoft, Yahoo's EPS was $0.15 per share.

Zimbra added five cents to the EPS although Yahoo! and VMware did not reveal how much Zimbra was sold for.

Microsoft, meanwhile, paid $78m - the first instalment of its $150m to cover transaction costs under its 10-year search pact with Yahoo!. That added two cents to Yahoo!'s diluted EPS. ®

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