Microsoft Is Moving Toward Checkmate With Yahoo

More details are emerging on round 2 of Yahoo/Microsoft: Instead of a simple straight-up acquisition, Microsoft (MSFT) may be able to pull off a deal where they get to pick off just what they want - search - and leave the rest of Yahoo (YHOO) and its troubles behind.

This is a deal that would obviously cost Microsoft much less than a $40+ billion full buyout. And Ballmer could quiet the Microsoft employees and stockholders who were making it known that they hated the original Yahoo deal. At the end of the deal, Microsoft would own Yahoo’s lucrative search and search marketing business, and be a stockholder in the resulting entity. That final version of Yahoo would certainly use Microsoft for at least some of its advertising (Yahoo’s display advertising business may stay with Yahoo).

I suspect a deal will be done quickly - Yahoo’s Yang and supporting board of directors are already being beaten senseless by their own stockholders and they can ill afford another round of incompetence.

If only Yahoo could go back to Febrary 2 and just take Microsoft’s original offer. Everyone but Google (GOOG) would have been better off. In fact, if I were them, I’d be spending half the ongoing negotiations just trying to get Microsoft back to their original offer. Who knows, Ballmer may even go for it.

Also look for Microsoft’s big search announcement on Wednesday at the Advance08 conference.

On Wednesday, we will be announcing a major new initiative that our search teams have been driving. We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model. You’ll hear more about our plans Wednesday.

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Comments

[coeus89:]

yahoo offer 31 a share to msft and work up to 33 and take teh money and run. you are 2 moves away from checkmate to split up the company. msft will be better off with teh whole company. i hope they buy all of yahoo. if they have cash. increasing their steak in facebook wouldnt be bad either.

2008 May 19 11:12 PM

[Alex Filonov:]

The best investment for Microsoft right now would be to dump MSN on Yahoo!. And pay handsomely for that, nobody is gonna take it for free. It's at least 5 billion on top of MSN (and much more if without search). Maybe Yahoo! can merge it with it's own pages and make it work. Of course, it would be even better for Microsoft to shut down MSN once and for all, but it will never happen. Not until Gates and Ballmer are at the wheel.

2008 May 19 11:35 PM

[chinaRetail:]

MS should buy the search and Panama (publisher network), integrate Panama with their adCenter marketplace, then spin off their on-line unit into a new company, live.com. Then sell a minority interest to newscorp and yahoo. This way they can sell ads to Yahoo, MSN, facebook, myspace, hotmail, yahoo mail, MS SaaS offerings, and Yahoo's publisher network, in one centralized location.

2008 May 19 11:53 PM

[NotVerySmart2:]

Yhoo's not gonna take this crappy deal. Yhoo + Goog by end of week.

2008 May 20 08:50 AM