First-quarter 2011 net income for Yahoo! sunk to $223 million, or 17 cents a share, from $310.2 million, or 22 cents per share. However, the search engine's sales exceeded estimates.

The Sunnyvale, CA-based company's revenue was $1.06 billion for the quarter, better than analysts' predictions of $1.05 billion.

Yahoo! is seeing a surge in display ad (banners and videos) revenue. And, the company's U.S. user base increased by 15 percent to 179.5 million in March over the same period in 2010.

The company projects sales will be between $1.08 billion and $1.13 billion in the second quarter of the year.

The drop-off in net income was attributed to some corporate consolidations. Yahoo! has been selling off some of its businesses and farming out its search operations. Yahoo!'s display ads have been particularly strong, with sales growing by 10 percent in the last quarter, to $471 million.

Yahoo! has been struggling to somewhat reinvent itself. The company has been trimming its workforce, and it has worked out an arrangement with Microsoft to use its search technology on Yahoo!’s sites.

Yahoo! is also reportedly considering unloading its stake in Yahoo! Japan, which it co-owns with Softbank Corp.