Yahoo Buddies With Google To Fight Off Microsoft
“Yahoo signs deal with Google, said to be in talks with AOL; Microsoft may bring in News Corp.”
San Francisco – The Yahoo-Microsoft takeover battle took a series of dramatic turns, as Yahoo last night moved to outflank Microsoft, which is threatening to launch a hostile takeover for the business, made good on its promise to seek “strategic alternatives” by announcing Wednesday a test partnership with top search rival Google.
“Yahoo speeded up its move to find an alternative while Microsoft reportedly brought a surprising player into the fray.”
In the early hours, Yahoo said that it will soon begin to run a limited test of Google’s AdSense online advertising service on its US website, which will deliver relevant ads alongside Yahoo’s own natural search results.
“This is just a limited test, and does not necessarily mean that Yahoo will join the AdSense program,” Google spokesman Daniel Rubin said.
The move aims to analyze whether the two companies could work more closely together in future.
Yahoo said it will perform a limited test, which is estimated to last up to two weeks and be limited to up to 3 percent of Yahoo search queries in the U.S., is specifically for Google’s AdSense for Search service.
The test is small in extent, Yahoo said: “The test will apply only to traffic from yahoo.com in the U.S. and will not incorporate Yahoo’s extensive network of affiliate or premium publisher partners. Put differently, Yahoo would be performing as one of the Web publishers that carry pay-per-click text ads from Google.
Insiders say the agreement is intended to counter the threat of Microsoft as it took a more hostile stance in its attempt to buy out the business.
Microsoft, whose initial $31 a share acquisition offer, presented more than two months ago, was rejected by Yahoo’s board as underestimating the company in February.
But on Saturday, Microsoft boss Steve Ballmer warned Yahoo that if it did not agree a deal by April 26 he would attempt a “hostile takeover” and take an offer direct to shareholders. He also warned that he might further reduce the value of the cash and shares bid, which values Yahoo at about $40bn (£20bn), in the process.
Yahoo expects to assess the potential of a more wide-ranging agreement with Google, in which it would outsource all its search advertising to Google. Wall Street analysts believe Yahoo might considerably improve its profitability by doing so because its Mountain View rival makes so much more money for each search.
Yahoo’s chairman, Roy Bostock, and chief executive, Jerry Yang, on Monday, replied back to Ballmer attacking Microsoft’s bullying tactics but admitted they were not opposed to a merger if the software company made a better offer.
Wall Street analysts, last night stated that Yahoo’s tie-up with Google may be a challenge to show Microsoft that if it is unwilling to come up with a better offer, Yahoo may well end up an even fiercer competitor through a tie-up with Google.
In a different dramatic development, while seeking alternatives, Yahoo may possibly be getting ready to executing a deal with Time Warner’s AOL. The Wall Street Journal reported Wednesday night that Time Warner is thinking folding its AOL unit into Yahoo and providing Yahoo with cash that it could use to buy back its own shares.
Another striking event that took place later in the evening, reported by New York Times — that Microsoft was holding talks with News Corp. on joint gauntlet for Yahoo, in a deal that would create an enormous Internet company combining Yahoo, Microsoft’s MSN and News Corp.’s Web properties, including MySpace and Fox Interactive.
With News Corp.’s aid, Microsoft can possibly raise its bid. But a person familiar with the talks told the Times that an explicit deal was still a long ways off.
“The report is particularly shocking because Yahoo had earlier talked to News Corp. about a possible deal.”
“Yahoo has certainly made a very clever move here,” Cowen and Co analyst Jim Friedland said.
“It seems like Microsoft had all the cards, Yahoo is at least now able to use this for leverage to get Microsoft to pay more,” he said.
Investors responded optimistically to the announcement with Yahoo shares rising 7%.