Jerry Yang, co-founder and chief executive of Yahoo!, suffered a potential setback yesterday in his bid to fend off advances from Microsoft after Washington’s Justice Department launched an investigation into a trial tie-up with Google.

It is thought that the Justice Department was concerned at talks between the two internet searchers over a two-week test to combine some web search and advertising business.

The Government’s concern, reports last night said, focused on a telephone call from Eric Schmidt, Google chief executive, to Jerry Yang to offer to help in thwarting Microsoft’s $45 billion (£22.74 billion) hostile takeover approach launched in February.

Yahoo! is keen to secure a deal with either News Corporation, parent company of The Times; AOL, the internet business of Time Warner; or Google, to help it to fend off being acquired by Microsoft.

But it emerged yesterday that the US Justice Department, which monitors anti-trust issues, had become concerned that any joint venture between the two groups would see 80 per cent of America’s internet searches done by just two companies.

A spokesman for Yahoo! said: “Yahoo! proactively kept the Department of Justice informed of its intentions to conduct this limited test with Google and have provided information on the nature of the test.”

The investigation is likely to deter the trial being extended into any sort of long-term tie-up between Yahoo! and Google.

At the same time, Apple, the computer-to-Ipod group and Amazon, the online books and DVD retailer, published this year’s first-quarter results.

Amazon’s first-quarter profits jumped 29 per cent, boosted by sales from within the US and abroad. Quarterly earnings rose to $143 million from $111 million in the same period last year.

Revenue was 37 per cent higher at $2.13 billion year on year. Both measures beat Wall Street expectations.

Despite Amazon’s US sales jumping 31 per cent, economists cautioned against drawing conclusions about the state of the US economy, in particular, consumer spending, from the data.

James Knightley, economist at ING, the Dutch bank, said: “These numbers have a lag effect. They actually refer to the last three months, not what is happening now.”

Amazon shares fell about 5 per cent in extended trading after giving warning that gross margins were below year-ago levels.

Apple also unveiled better than expected quarterly figures, with profits for the second quarter of its financial year rising to $1.05 billion compared with $770 million for the same period the year before.

Revenue during the period rose 43 per cent to $7.51 billion boosted by the sale of 10.6 million iPods and 1.7 million iPhones.

Shares in after hours trading were down 0.9 per cent from the close at $161.45 as Apple, known for conservative financial forecasts, also gave a profit outlook for its current quarter that was below Wall Street estimates, saying it expected earnings of $1.00 per share on revenue of $7.2 billion.

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