Jerry Yang, the co-founder of Yahoo!, said yesterday that the online search engine may still recommend a hostile takeover from Microsoft after admitting that it had already spent $14 million (£7 million) in fees to advisers such as Goldman Sachs and Lehman Brothers to fight the approach.

Unveiling a 9 per cent rise in revenues for the first quarter of the year to $1.82 billion, Mr Yang said he remained “open to any and all alternatives including a sale to Microsoft”.

Wall Street, however, remained unconvinced that Microsoft’s $43 billion cash and shares offer undervalues the company. In after-hours trading, shares in Yahoo! were virtually unchanged at $28.36. At the end of formal trading yesterday, the stock closed at $28.54 — the Microsoft offer values each Yahoo! share at $31.

Since Microsoft approached Yahoo! at the beginning of February, the search group has approached News Corporation, parent company of The Times; AOL, the internet operation of Time Warner; and has explored a possible joint venture with its bigger rival Google.

Yahoo!, which claims to reach 75 per cent of all American internet users, is trying to find another partner so that it can either avoid being bought by Microsoft or extract a higher price from the software company.

It has already rejected a takeover proposal from Microsoft, claiming that the offer price was too low.

Microsoft wants Yahoo! because it needs to compete more aggressively with Google to seize a share of the online advertising market, which is estimated to be worth $40 billion and is expected to double in two years.

Yahoo! reported better than expected profits for the three months to March 31.

Boosted by a large gain from its stake in the Chinese group Alibaba, first-quarter net income rose to $542.2 million, compared with $142.4 million for the same period the year before.

Excluding exceptional items and stock compensation costs, Yahoo! reported a profit of $150 million.

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