Plans for Microsoft and Yahoo to take on Google
Alliance would open up internet search market
Tuesday 21 July 2009
Yahoo executives are to be questioned today on reports that they may be ready to set aside their differences with Microsoft and make an alliance against a common enemy: Google.
While Google continues to dominate the internet search market – and harvest the majority of the revenues from ads placed alongside search results – a new chief executive at Yahoo and a new search engine from Microsoft, the well-received Bing, have changed the dynamics of the negotiations between the two companies.
The two sides are in the final stages of talks about a deal that could see Microsoft take over the running of Yahoo's search-based advertising business, in return for guaranteed payments to Yahoo. The shape of the deal is still unclear, however, and analysts are nervous that the negotiations could still break down.
Yahoo's second-quarter financial results are due after the close of trading today, and Microsoft reports its latest figures on Thursday, giving an opportunity for investors to question executives at both companies – even if a deal is not sealed in time to be announced.
Youssef Squali, an analyst at Jefferies & Co, is recommending investors buy Yahoo shares, even though current results will be muted by the advertising recession. He raised his price target on the shares by 5 per cent yesterday, citing, among other things, the potential for profits from the Microsoft alliance. Todd Lowenstein, a fund manager at HighMark Capital, said: "The sooner these two decide to bring the best of what they both have together and then jointly go after the market, the more it will benefit both."
In rancorous, on-again-off-again talks over the course of almost 18 months, Microsoft repeatedly tried to buy Yahoo, finally offering $46bn for the company last year, only to be turned down by its founder and then-chief executive Jerry Yang. A later attempt to tie up an advertising alliance also collapsed, as Yahoo agreed to outsource its search-based advertising business to Google, only to find that deal scuppered over competition concerns.
Carol Bartz, who took over as Yahoo's chief executive in January, has signalled she is more open to a Microsoft alliance and has met on several occasions with Steve Ballmer, her opposite number at Microsoft. Last week, several senior Microsoft executives are understood to have flown to Silicon Valley to meet Yahoo counterparts to try to hammer out a deal.
The launch of Bing by Microsoft has helped it claw a little market share away from Yahoo. According to ComScore, Microsoft's share of search queries rose to 8.4 per cent in June from 8 per cent the previous month, while Yahoo fell to 19.6 per cent. Sixty-five per cent of search queries go through Google.
The activist investor Carl Icahn, who bought into Yahoo last year to agitate for a sale to Microsoft, is putting on more pressure for an alliance. "I've been a strong advocate of getting a search deal done with Microsoft," he said. "It would enhance value if a deal got done, because of the synergies involved."
Yahoo shares are half the value of Microsoft's takeover offer. Microsoft is expected to report the first annual sales dip as a public company on Thursday, but the signs of a tie-up with Yahoo and a strong pipeline of new products have pushed its shares up 63 per cent since early March. It has begun trailing the launch of a Windows 7 operating system, and has a new version of its Office applications suite in the works.
- 3 The enemy within: People who hear voices in their heads are being encouraged to talk back
- 4 Phil Neville backtracks on Tomas Rosicky 'I'd smash him' comments from Match of the Day 2
- 5 British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Paris attacks: Do not call Charlie Hebdo killers 'terrorists', BBC says
UK weather: Snow to fall in the coming week with sub-zero temperatures to last until early February
Asteroid narrowly scrapes past Earth: how to watch the closest space rock for decades as it flies by
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Prince Philip set to be knighted by Australia: Celebrate by reading his greatest gaffes
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...