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).
Yahoo! Inc. (NASDAQ: YHOO) was quick to shoot down unsubstantiated rumors that CEO Jerry Yang was stepping down on Wednesday. It wasn't the first time such reports have cropped up, and it probably won't be the last.
While we'll take Yahoo!'s word, for now, that Yang has no intention of resigning, it's certainly not out of the realm of possibility that the company's co-founder could choose to abandon his post. Within the next couple of weeks, Yahoo! should have a pretty good idea how it's doing in its proxy fight with activist investor Carl Icahn. If the internet company is in real jeopardy of losing, Yang could decide to fall on his browser in hopes of allaying shareholder anger at the company over the derailed deal talks with Microsoft Corp. (NASDAQ: MSFT) and taking some of the sting out of Icahn's campaign. Also, taking Yang out the equation would send a message that Yahoo! is serious about at least entertaining a deal, since he's been perceived as a major obstacle to a transaction.
To that end, All Things Digital's Kara Swisher is reporting that Icahn is trying to enlist former AOL head Jon Miller or Fox Interactive Media executive Ross Levinsohn, both partners at venture firm Velocity Interactive Group, to take the CEO post at Yahoo!
August 1 is still weeks away, but Yahoo! Inc. (NASDAQ: YHOO) is kicking off a full-court press as it faces off with Carl Icahn (and sidekick Microsoft Corp. (NASDAQ: MSFT) over control of the internet company's board of directors.
Yahoo! CEO Jerry Yang toldThe Wall Street Journal he believes Microsoft is trying to destabilize his company, but has no real desire to acquire the company. Yang's belief is certainly a plausible explanation for why Microsoft earlier this week said it would be willing to discuss an acquisition of Yahoo!'s search business or, alternatively, the whole company, but only if a new board of directors was elected. While some who have watched the saga believe Microsoft may have crossed a line and is now out to destroy and humiliate Yahoo!, can Microsoft really be blamed for its actions when Yahoo! did everything it could short of a scorched earth policy to avoid making a deal? And now we're supposed to believe Yahoo! has "prostrated themselves" before Microsoft to get a merger done? Please.
Elsewhere, Legg Mason Capital Management''s Bill Miller told Reuters that Icahn would have more support in his proxy fight if he pledged not to sell the company for less than $33 a share, or $47.5 billion, Microsoft's last offer. Legg Mason owns slightly more than 5% of Yahoo! Continue reading at TechConfidential.com.
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 fell below the $20 mark in early trading on Tuesday and are approaching the stock's closing price of $19.18 reached on Jan. 31. That's the session before Microsoft Corp. (NASDAQ: MSFT) publicly came out with its $31 a share, $44.6 billion offer to acquire Yahoo! in a saga that is now in its sixth month.
The $20 threshold is significant, if mostly psychologically. Many analysts expected Yahoo! shares to find support ahead of that level on speculation that such a price makes the company vulnerable to another acquisition offer from a strategic or financial buyer. Yahoo! was in an "anyone-but-Microsoft" mode after the original offer and reportedly had talks with the likes of News Corp. (NYSE: NWS) and Time-Warner Inc. (NYSE: TWX), whcih could be interested in some kind of deal now that Yahoo! is cheaper. Indeed, there's talk Yahoo! may already be looking to revive talks with Time Warner-owned AOL L about combining the operations.
It didn't have to be this way. Had Yahoo! negotiated with Microsoft rather than fighting a deal at all costs, shareholders wouldn't be looking at a stock that is now 40% below Microsoft's reported last offer of $33 a share.
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.
Not long after closing the door on the pursuit of Yahoo! Inc. (NASDAQ: YHOO), an acquisition that would have boosted its online advertising business, Microsoft Corp. (NASDAQ: MSFT) is making another purchase -- albeit much smaller -- that could enhance its ad presence in an entirely different way. The software giant is acquiring Navic Networks Inc., a venture-backed company that makes software to enable the placement of targeted ads for television.
While the deal has largely gone under the radar, probably due to its undisclosed purchase price, it is an intriguing move for Microsoft, which over the course of the Yahoo! saga pretty much came clean with its desire to improve its home-grown advertising business. The software giant, however, to date has largely expressed an interest in Internet advertising. The lines between television and Internet are indeed blurring these days, with more cable and network content being made available online and more original content being created for Internet protocol television. Nonetheless, in its statement announcing the Navic purchase, Microsoft seemed mostly interested in the traditional television market, noting that "television media represents the largest percentage of advertisers and agencies' media budget today." The company said it now plans to work more closely with the advertising industry to help advertisers better attain their objectives.
In many ways, today's television advertising looks like a business that time and technology forgot. Advertisers trying to track audience sizes use the same tool they used decades ago: Nielson Media Research. Nielson surveys a representative sample of TV viewers to produce reports estimating the total audience size but uses few of the bells and whistles online advertisers have at their disposal to get not only a more accurate view of the audience size, but to see how engaged that audience was, in the form of click-throughs and other measures.
A shareholder group taking Yahoo! Inc.'s (NASDAQ: YHOO) board of directors to court for allegedly not exercising their fiduciary duty in negotiations with Microsoft Corp. (NASDAQ: MSFT) was dealt a setback after a Delaware judge rejected a request for an expedited trial.
Lawyers representing the Police & Fire Retirement System of the City of Detroit and the General Retirement System of the City of Detroit were looking to speed up a decision on the validity of a severance plan put in place by Yahoo! in February after Microsoft offered to acquire the company. They were hoping to get a decision before Yahoo!'s Aug. 1 shareholder meeting.
But Chancellor William Chandler of the Court of Chancery of the State of Delaware denied the motion, saying the plaintiffs failed to meet their burden for showing why the matter needed to be heard quickly. The judge said he would be able to rule on a motion by lawyers for Yahoo! to dismiss the case before Aug. 1.
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."
According to Yahoo, "Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested."
With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors rejected it for three reasons:
Such a transaction would not be consistent with the company's view of the converging search and display marketplaces,
Would leave the company without an independent search business that it views as critical to its strategic future, and
Would not be in the best interests of Yahoo! stockholders.
Expect more loud squawking noises from Carl Icahn to follow. Cover your ears!
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.
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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 
