Because Microsoft Corp. (NASDAQ: MSFT) and Yahoo! Inc. (NASDAQ: YHOO) apparently prefer to do much of their heavy squabbling over the weekend, there's little noise emanating from Silicon Valley or Redmond, Wash., Tuesday morning, though an activist investor in New York may still be seething after his attempts to broker some kind of deal between the two companies went up in smoke.
Citigroup Inc. analyst Mark Mahaney (pictured) is weighing in on the fallout from the latest developments, astutely concluding Microsoft may not want to focus just on Yahoo!'s search business assets, but also its display advertising business, and acquire the entire company. Though he is skeptical of Yahoo!'s argument that a search-only deal would undermine the synergies between its search and display businesses, he points out that the online display advertising market, which was a $7.2 billion business in 2007, is set to grow 15% in 2008, and Yahoo! has a 27% share of it.
After running the numbers from Microsoft's latest proposal to acquire Yahoo!'s search business, Mahaney argues the cash flows to Yahoo! "don't seem overwhelming," especially when considering the strategic value of the business to Microsoft in its quest to better compete with Google Inc. (NASDAQ: GOOG).
In an open letter to his fellow long-suffering Yahoo shareholders, billionaire Carl Icahn disclosed that he has spoken "frequently" with Microsoft CEO Steve Ballmer; "frequently" over the past week about Yahoo. Ballmer indicated to Icahn that the world's largest software company would still be interested in doing a deal ... with one catch.
"Steve made it abundantly clear that, due to his experiences with Yahoo! during the past several months, he cannot negotiate any transaction with the current board," Icahn said. "If a new board were elected, he would be interested in discussing a major transaction with Yahoo!, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected."
In a separate press release, Microsoft underscored Icahn's statement, adding that despite speaking with Yahoo!'s board since last year, the company decided that it cannot reach an agreement with the current board. Can you say trial balloon?
Microsoft Corp. (NASDAQ: MSFT) may try to buy Yahoo! Inc. (NASDAQ: YHOO) again, but it does not want the whole company. It finds the search business useful as part of its battle with Google (NASDAQ: GOOG). The content portal business does not have much attraction, and Redmond wants a company like Time Warner (NYSE: TWX) to pick up that piece. According toThe Wall Street Journal, Microsoft "approached other media companies in recent days about joining it in a deal that would effectively lead to Yahoo's breakup."
The new deal just might work. Yahoo! dropped below $20 yesterday, putting its stock back where it traded before the first buy-out offer. The No. 2 search company's shares reached as high as $33. Investors, especially Carl Icahn, are steamed that Yahoo! did not grab all of that extra money.
Even if Microsoft cannot find a partner to take the Yahoo! content business, it may move ahead. It only has 10% of the US search business. Yahoo! has about 20% and Google around 60%.
Microsoft still needs Yahoo!, and with its stock down by a third, Yahoo! needs a buyer.
Douglas A. McIntyre is an editor at 247wallst.com.
Yahoo! Inc. (NASDAQ: YHOO) shares were roughly flat in early trading on Wednesday after gaining 3% on Tuesday on word that the company was again talking deal with Microsoft Corp. (NASDAQ: MSFT). Though shares spiked on reports that talks were in progress, they settled down quickly because of conflicting reports as to the extent of the talks. While technology blog TechCrunch reported the two sides were in discussions on an outright acquisition of Yahoo!, other reports indicated the two had revived discussions of an acquisition of Yahoo!'s search business.
A source close to Yahoo! late Tuesday said the TechCrunch report was "miles off," but could not confirm the two companies were again talking about a deal for the search business. The source did note that when Yahoo! announced it would be outsourcing a portion of its search advertising business to rival Google Inc. (NASDAQ: GOOG), the terms did not preclude Yahoo! from selling all or part of its business.
Put this in your "death by 1,000 cuts" file. Reports resurfaced today that Yahoo! Inc. (NASDAQ: YHOO) and Microsoft Corp. (NASDAQ: MSFT) have resumed talks over a possible deal. It's worth noting that the chatter is coming from a Yahoo! investor, who obviously may have a vested interest in the companies eventually clinching a transaction. But the rumors had enough teeth to drive Yahoo! shares up as high as $23.71, with the stock up 2.2%, to $21.92 in late afternoon trading.
Since the companies formally ended acquisition talks earlier this month, Microsoft has said repeatedly that it's no longer interested in acquiring all of Yahoo!. But with Yahoo! shares sagging, the software giant may think it can get the Internet portal on the cheap or at least for less than its last bid of $33 a share, or $47.5 billion offer. Other reports indicate the two sides could be reviving talks in which Microsoft would acquire Yahoo!'s search business for more than the $9 billion it was reportedly willing to pay previously.
Yahoo!'s situation has eroded since the talks ended. An announced deal to outsource some of its search advertising business to rival Google Inc. (NASDAQ: GOOG) provided only a modest lift to its shares. The company also has seen a number of high-profile executives leave over the past few weeks, and concerns are mounting about its second-quarter numbers. Oh, and Carl Icahn is still around, though he hasn't had much to say about his proxy fight for control of the company's board of directors of late.
Poor Yahoo! Inc. (NASDAQ: YHOO) can't seem to catch a break. The company took a lot of heat last week on news that a number of executives would be leaving the company in advance of a reorganization, though others are taking a more contrarian view and noting it might not be such a bad thing for Yahoo! to shed some of its talent. Today, its second quarter outlook is drawing fire.
Sandeep Aggarwal, an analyst with Collins Stewart LLC, in a research note on Monday writes says that the failed acquisition talks with Microsoft Corp. (NASDAQ: MSFT) has been a major distraction for Yahoo! and, worse, that economic factors are taking a toll on display advertising spending, while the aforementioned executive departures are causing project delays and execution hurdles. He also contends that the reorganization being discussed "only highlights the grass roots level problems and likely margin pressures at Yahoo!."
In addition, Aggarwal isn't impressed with the search deal Yahoo! struck with rival Google Inc. (NASDAQ: GOOG), arguing that an outright sale to Microsoft, or shipping its search business to to the software giant would have been a better alternative. He drops his forecast for Yahoo!'s second quarter revenues to $1.37 billion, from $1.4 billion, and adjusted EBITDA to $460 million, versus $467 million. He continues to rate the stock a "hold," but reduces his price target to $23 a share, from $26. Early in Monday's session, shares of Yahoo! were down less than 1% at $21.85.
Carl Icahn, who hadn't been heard from (at least publicly) since Yahoo! Inc. (NASDAQ: YHOO) announced June 12 that it had broken off talks with Microsoft Corp. (NASDAQ: MSFT) and instead would partner with Google Inc. (NASDAQ: GOOG) for its search-related advertising, finally broke his silence. Icahn told Reuters Yahoo!'s deal with Google "might have some merit," but left open whether he would continue with his proxy fight to replace the company's board of directors.
It would not be a surprise if Icahn were to abandon the fight. His main purpose in trying to take over the company was to facilitate a sale to Microsoft, which appears far less likely today, though some people still think Microsoft could resume its pursuit of Yahoo! at a lesser price. He also was facing a battle to win support from shareholders, who haven't failed to notice that he has yet to articulate a plan for running the company beyond fobbing it off on Microsoft. In addition, Yahoo! sneakily incorporated a clause in its deal with Google that allows either side to terminate the agreement in the event of a change of control, with Yahoo! agreeing to pay the search giant $250 million if that happens. The clause serves as an entrenchment device for Yahoo!'s board at the expense of the challenger since it doesn't apply to the current regime.
Elsewhere, activist investor Eric Jackson weighs in with his thoughts on the proxy fight on Monday, encouraging Yahoo! investors to vote for five of Yahoo!'s candidates for the nine board seats and four Icahn-backed nominees. Though Jackson wants Icahn to win outright, he believes large shareholders are worried about what would happen to the company if the activist investor takes control and that they will instead throw their support behind Yahoo!'s slate. This option seems unlikely to fly as it's difficult for institutions to split their votes. Instead, Icahn stands a better chance of winning representaiton on the board if he runs a minority slate of candidates rather than the full slate he is currently running. He would be much more likely to get support from proxy advisory services and institutions in this scenario.
Yahoo! Inc.'s (NASDAQ: YHOO) search deal with Google Inc. (NASDAQ: GOOG) is playing to mixed reviews on Wall Street. Yahoo! shares were trading down 6.5% at $22 a share early in Friday's session after tumbling 10% on news that the company had broken off all talks with Microsoft Corp. (NASDAQ: MSFT).
Market analysts saw good and bad in Yahoo!'s new search deal with Google, which will place Google's paid search results next to Yahoo!'s in the U.S. and Canada. Yahoo! said it expects the new revenue-sharing agreement to generate earnings of $250 million to $450 million during the first 12 months of the deal.
Though the two companies have structured the deal in an effort to appease antitrust regulators, a business agreement between the top two leaders in search advertising will undoubtedly draw scrutiny. Cowen & Co. analyst Jim Friedland expects Microsoft to immediately begin lobbying against the deal in Washington, although he expects that the transaction will pass muster with regulators "since the market -- not Google -- determines keyword pricing."
Yahoo! Inc. (NASDAQ: YHOO) remains under attack for severance plan it adopted in February in response to Microsoft Corp. (NASDAQ: MSFT) $44.6 billion acquisition offer.
But, as Yahoo! CEO Jerry Yang might say, reports of Yahoo!'s death are being greatly exaggerated. If you're willing to roll the dice, you can still get a job at the company (and benefit from the generous severance in event of a change of control). UBS analyst Benjamin Schachter took a look at the job postings at Yahoo! and Google Inc. (NASDAQ: GOOG) in an attempt to get some insight into areas of emphasis for the two companies.
In the first quarter of 2008, Yahoo! had 1,306 open positions, versus 1,147 last year, though Schachter expects more turnover and difficulty filling open positions due to increased uncertainty at the company. A key focus area revolves around Yahoo!'s next-generation advertising platform, with numerous listings for jobs helping build a platform that better targets and measures display ads. Schachter speculates Yahoo! is attempting to do in display advertising what Google has done for text-based advertising.
By now you'd figure there would be some clarity about how the Yahoo! Inc. (NASDAQ:YHOO) - Microsoft (NASDAQ::MSFT) saga is going to play out. After all, it's been more than three months since Yahoo! first said "thanks but no thanks" to Microsoft and its $31 a share, or $44.6 billion, acquisition offer. But noooo, and each day it seems there's another piece of information that must be dissected and analyzed.
Today's tidbit of news comes from Israel, where Microsoft CEO Steve Ballmer told reporters the company is not looking to acquire all of Yahoo!, but instead is "trying to have discussions about deals with Yahoo! that might create value...." It's not a whole lot different than what Microsoft disclosed on Sunday, though it does give more ammunition to those who believe the software maker is no longer interested in pursuing an outright acquisition with Yahoo! at the moment.
Adding to the uncertainty is that Yahoo! continues to talk about alternative deals with everyone from AOL to MySpace to rival Google Inc. (NASDAQ: GOOG). Meanwhile, corporate rabble rouser Carl Icahn is busy lining up shareholders to oust Yahoo! board of directors, though it appears as though Icahn will have difficulty getting rank-and-file shareholders on board if they don't have a reason to believe Microsoft wants to come back to the bargaining table and revive acquisition talks. Continue reading at TechConfidential.com.
Yahoo! Inc.'s (NASDAQ: YHOO) stock price has held up surprisingly well. Trading at $26.07 midday, its shares are only modestly below their closing price of $26.81 on May 1, the session before they rallied on talk that Yahoo! and Microsoft Corp. (NASDAQ: MSFT). were close to a deal. The price is even more surprising given the reports that Yahoo! plans to outsource its search advertising to Google Inc. (NASDAQ: GOOG) may be premature. If that deal is on the backburner, there's little else to support Yahoo!'s stock unless investors are counting on it renewing talks with Microsoft.
Yahoo! has come under fire from shareholders after Microsoft withdrew its offer over the weekend. In the fallout, Yahoo! execs have postured to suggest they were open a deal for even less than the $37 a share, or $53.2 billion, counteroffer they reportedly made to Microsoft's $33 a share, or $47.5 billion, offer.
But If Yahoo! really has indicated to Microsoft that it would accept $34 a share offer, which comes to $48.9 billion, a deal could still come together quickly. Not that it would be simple. Yahoo! has had plenty of time to come to terms. Meanwhile, with Yahoo! shares poised on the precipice, Microsoft arguably has more leverage than it has during the entire saga, which means it can better dictate terms. Microsoft can let Yahoo! sweat it out until the Internet company's annual meeting in July, when shareholders are likely to be in a lather.
Trying to make sense of all the rumors about Microsoft (NASDAQ:MSFT) buying Yahoo! (NASDAQ:YHOO) and Yahoo! making a search deal with Google (NASDAQ:GOOG) is senseless.. Only three or four people are actually playing the cards and they are all lying to one another. Steve Ballmer may be the biggest liar of all but he controls the most chips.
The only thing for certain is that, once this is all over, Yahoo!'s shareholders will be better off. Either it cuts a deal to outsource search to Google and that gets approved by the government, or Microsoft puts Yahoo!'s long-time shareholders out of their suffering and buys the portal company for $31 a share or something in that neighborhood.
Yahoo! has a chip in the game because it was so poorly run. Ironic, but true. If it had pushed its search business harder five years ago, it might not have been overtaken by Google. If it had not gone through three CEOs over that period, it would be a sign that it had some long-term plan which was working.
If you take Microsoft Corp. (NASDAQ: MSFT) CEO Steven Ballmer at his word, the company has no intentions of raising its current $31 a share, $43 billion offer to acquire Yahoo! Inc. (NASDAQ: YHOO). But those following the seemingly never-ending saga (and one that appears destined to continue indefinitely) still see a higher offer in Yahoo!'s future.
Yahoo!'s first-quarter earnings report on Tuesday in and of itself will not get Microsoft to increase its offer. But they do give the company some leverage if and when it chooses to enter into serious negotiations with Microsoft.
"The most feasible, logical combination is still Microsoft buying them; it just comes down to the last-minute negotiations and whether the first quarter and outsourcing search to Google (NASDAQ: GOOG) are enough of a trump card to raise the bid," said RBC Capital Markets analyst Ross Sandler. "Or Microsoft can choose not to and go hostile."
Following this Yahoo! Inc. (NASDAQ: YHOO) affair is like playing a very high-stakes game of Three Card Monte: Take your eyes off the lucky lady and, pfffft, you're cooked.
As paidContent reported yesterday and the Wall Street Journal confirmed this morning, Time Warner Inc. (NYSE: TWX) is talking with the Internet company about shipping AOL and a trunk full of cash to Yahoo! in exchange for a minority stake in the combined company and a chance to close the door on one of the dumbest mergers in recent memory. AOL would get a lifeline. Beyond escaping Microsoft Corp.'s (NASDAQ: MSFT) $42 billion headlock, in AOL Yahoo! would get what remains a premier player in internet advertising and a company that retains large online audiences for financial, entertainment and other content.
The hardest thing to figure here is what's happening on the other side of the deal, where Microsoft is reportedly lining up News Corp. (NYSE: NWS) for a joint bid for Yahoo!. Under that scenario, Yahoo! would be folded in with Microsoft's MSN portal and News Corp.'s MySpace unit in one mighty online ad-selling, application-bundling, social networking-ing company. That Microsoft CEO Steve Ballmer is thinking of climbing into business with News Corp.'s Rupert Murdoch (pictured) suggests just how worried the software giant is about losing Yahoo!. But Ballmer should think twice. Murdoch has a famously keen instinct for when to buy, sell or hold a business. His interest in unloading MySpace underscores that, with the rise of FaceBook and other social networks, the Web property's best days might be behind it.
There is a report out of the Wall Street Journal that Yahoo! Inc. (NASDAQ: YHOO) and Time Warner Inc. (NYSE: TWX) may be close to inking a deal that would potentially combine Internet operations of the web giants. Obviously, this would be directed right at thwarting the current attempts by Microsoft (NASDAQ: MSFT) to acquire Yahoo!.
According to the WSJ, Time Warner would make a large cash investment into Yahoo! and then Yahoo! would repurchase "billions of dollars" worth of its own shares in the mid-$30's. While this is an attempt from Jerry Yang to fetch a higher valuation, there is no guarantee that any such valuation would net a higher return for shareholders. There were headlines earlier today tying Yahoo! into running some "test search-ads" via Google (NASDAQ: GOOG). Google still owns 5% of AOL as well.
We have considered all the possibilities in a similar situation, and what the ramifications for other Internet and media players out there. For starters, we'd even call it a rumor, and we'd even note the possibility that this could be a "test announcement" from the companies to see what the reaction would be if such a deal was formally struck (that wouldn't be the first time any company has done that). This entire situation should still all be considered hearsay at this point as there have been no press releases issued by any of the companies on any such merger terms, investment terms, and ad terms. If it is real, then we'd be expecting a press release from one of the companies at some point by Thursday or Friday, if not sooner.
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Because Microsoft Corp. (NASDAQ: MSFT) and Yahoo! Inc. (NASDAQ: YHOO) apparently prefer to do much of their heavy squabbling over the weekend, there's little noise emanating from Silicon Valley or Redmond, Wash., Tuesday morning, though an activist investor in New York may still be seething after his attempts to broker some kind of deal between the two companies went up in smoke.
The 
