SAN FRANCISCO (Reuters) - Yahoo Inc posted slightly lower-than-expected quarterly revenue and indicated that current-quarter sales could again miss Wall Street estimates, as it struggles to compete in web search against Google Inc.

Shares of Yahoo fell three percent in extended trading, after its outlook implied that second-quarter net revenue would be between $1.128 billion and $1.184 billion, compared with the average analyst estimate of $1.184 billion.

"It's somewhat disappointing," said Clay Moran, analyst at Benchmark, noting a 14 percent year-over-year drop in search advertising revenue. "So they're continuing to struggle in search and still contracting in a meaningful way...The (improving) economy hasn't helped them in any noticeable way."

Yahoo's first-quarter net revenue, which excludes the money the company pays to partner websites known as traffic acquisition costs (TAC), fell 2.6 percent to $1.13 billion, below the average analyst estimate of $1.17 billion, according to Thomson Reuters.

Net income rose to $312.3 million, or 22 cents a share, from $118.7 million, or eight cents a share, a year earlier, helped by the sale of the Zimbra business and a partnership with Microsoft Corpon search.

Excluding those items, Yahoo posted a profit of 15 cents per share, beating the average analyst estimate of nine cents, according to Thomson Reuters.

Chief financial officer Tim Morse told Reuters in an interview that Yahoo's Internet display business was strong during the first quarter, growing 20 percent year-on-year, but that the search business came in a bit weaker than expected.

"Search queries just didn't seem to grow at the pace they had previously," said Morse.

Yahoo's revenue per search increased two percent from the seasonally strong fourth-quarter, but were down 14 percent year-over-year, Morse said.