Just forget about what Ballmer is saying on Microsoft (NSDQ: MSFT) not raising its bid for Yahoo (NSDQ: YHOO). The market is telling you everything you need to know. Despite a modest “beat and raise”, the initial Microsoft offer still looks more like a ceiling than a floor. If there were anything in the report that warranted a higher offer, Yahoo shares wouldn’t be trading down over 1 percent. This doesn’t mean a raised bid is impossible. If Microsoft decides that it’s better to just end things than to have them drag out, it may swallow its pride and cough up a few more bucks, but last night’s report won’t figure in to that decision. By and large, that’s how analysts feel. The results give Yahoo some credibility at the bargaining table—it’s not a total basket case—but not so much that Microsoft is back on the defensive:

SEE ALSO: Ballmer: Microsoft Can Live Without Yahoo

—Jeff Lindsay, Bernstein: ” As it is, we think Yahoo! has done enough to hold on a little longer but has fallen short of being able to convince shareholders to reject Microsoft’s overtures.  Unless Yahoo! has a real alternative in the form of a deal with Google (NSDQ: GOOG) or AOL (NYSE: TWX) or both, then we think it is only a matter of weeks before Microsoft prevails.”

—Ross Sandler, RBC: “The Q1 beat may be enough to give YHOO some leverage to seek a (slightly) raised bid, as estimates are heading higher. However, the lack of margin expansion in 2H08 may signal investment push-out vs. sustainable upside from 1Q.”

—Ben Schachter, UBS: Maintaining his view that Microsoft will up its bid just to get the deal done: “Given YHOO’s track record and uncertainty surrounding the macro environment, a solid qtr and increased guidance is nice to see. That said, we don’t believe that anything in last night’s report changes the outlook for the deal, and we continue to believe that MSFT will increase its bid or perhaps make it an all-cash deal valued in the $32-$35 range.”

—Mark Mahaney, Citi: No real change: “Did Yahoo!’s fundamentals improve? No. Yahoo!’s Y/Y net total revenue growth rate was up 14% Y/Y – in line with the growth of the two prior quarters.”