San Francisco — After almost 18 months of most bitter negotiations the Silicon Valley has witnessed, and unless there is some major flaw, Microsoft at last is said to be finalizing a deal to buy technology rival Yahoo’s web search business, according to an All Things Digital report late on Thursday.
The long-awaited Microsoft-Yahoo search pact may take place soon, according to a report attributed to ThinkEquity analyst William Morrison.
Several reports sprang up late on Thursday suggesting that last-stage talks were under way between the two companies, according to the report, the two sides are “down to the short strokes” after years of excruciatingly well publicized on-again, off-again talks, might now open up the distinct possibility that Microsoft could finally take control of Yahoo’s search engine division.
Sources at a major client of investment house ThinkEquity say that the firm considers a Microsoft link-up with Yahoo! in the search business to be “imminent”. The comments were made by analyst William Morrison. ThinkEquity did not have an immediate comment.
Top Microsoft executives including SVP of the Online Audience Business Group Yusuf Mehdi, search head Satya Nadella and top digital exec Qi Lu, as well as others have all flocked down to Silicon Valley from their Redmond, Wa. HQ today to settle down the remaining issues, which seems to have to do with the deployment of technology.
“It is an entourage,” joked one exec.
Precisely it is unclear what the terms of the deal on offer are, but according to sources beyond ThinkEquity speculate that under the terms of the arrangement, Yahoo! will be paid $3 billion upfront and will get 110% of the revenue that its searches provide after traffic acquisition costs in each of the first two years. In the third year, that figure would go to 90%.
Microsoft CEO Steve Ballmer is also deeply involved in the talks, although he is not with the group.
Yahoo CEO Carol Bartz said in May that she is ready for a search deal if she considered the partner’s technology besides they provided boatloads of money. Microsoft CEO Steve Ballmer has indicated for more than a year now that he would like to strike some sort of search deal, although he no longer wants to acquire all of Yahoo as the company offered to do in February 2008.
In the meantime, relations between the two companies have been cool — and both sides have declined to comment on rumors of reported negotiations.
If Microsoft can finally seal the transaction, it will, for a comparatively modest sum, have wrapped up 30% of the US search market, giving its new Bing product a chance to thrive. Bing has picked up modest market share since its launch, but many analysts believe that after its $100 million marketing campaign is over, that share will be largely lost.
For Yahoo!, the pact would give it the opportunity to lock in a substantial revenue stream from search and potentially save several hundred million dollars over the next three years by cutting development personnel and costs.
Since the negotiations between the two soured late last year, however, Yahoo has brought in a new CEO, Carol Bartz — who may take a more pragmatic view of the situation given Yahoo’s financial struggles.
According to All Things Digital, if all goes well, the transaction could materialize within a week, Yahoo!’s share could jump $4 or $5.