Yahoo now open to acquisition talks, will Microsoft bite?

By Tom Warren, on 7th Sep 11 10:18 am with 60 Comments

Former Yahoo CEO Carol Bartz and Microsoft CEO Steve Ballmer

Yahoo is reportedly open to sale talks with the right bidder, but will Microsoft still be interested?

Yahoo’s board fired CEO Carol Bartz on Tuesday over the phone after nearly three years in charge of the struggling internet services company. Bartz informed employees of her termination in an email from her iPad on Tuesday afternoon. CFO Tim Morse has been named the interim CEO to fill the role until a suitable replacement is found.

Business Insider reports that Yahoo is willing to put the company up for sale. A Yahoo spokesperson who spoke to the Wall Street Journal revealed that “Yahoo is open to selling itself to the right bidder.” Yahoo’s for sale sign could trigger interest from Microsoft once again. The software giant offered $44.6 billion cash-and-stock to purchase Yahoo in February, 2008. The deal was an impressive one for Yahoo, valuing its stock price at $31, a significant premium on its true value at the time. Despite the offer, Yahoo was greedy and wanted more. Microsoft upped its offer to $33 a share but Yahoo wanted $37 per share. Yahoo’s board of directors eventually went public with a reply to Microsoft’s ultimatum, stating “we have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders. Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.”

The failed acquisition eventually surfaced as a search deal between Bing and Yahoo. Microsoft secured a 10-year deal in July 2009 to push Bing as the exclusive algorithmic search and paid search platform for Yahoo! sites. The agreement ended Microsoft’s talks with Yahoo which had lasted around two years. Yahoo has failed to make an impact with its various web properties, despite acquiring popular photo sharing site Flickr. The once popular web portal has struggled against Google and Facebook in the new world of social networking. A Yahoo sale in 2011 could open the doors to a number of new options for the company. Microsoft may still be interested given the close Bing relationship, but Apple is in a strong position to offer cash options to scoop up a web property. Apple has money in the bank and has long been rumored to be considering a big cash acquisition. Google would also be interested in any potential deal. Antitrust regulators would likely move to block any interest from Google given their large market share.

What do you think? Would Microsoft be crazy to purchase Yahoo or is it a good deal?

  • http://www.Nave360.com Sebastian Gorgon

    Wow… if they do then i’m not sure what the future will be like… I hate Yahoo but Yahoo and bing together is one step closer to taking more market-share 

  • http://www.searingarrow.com AlienSix

    Go for it Microsoft, why the hell not

    • http://twitter.com/alexwilks88 Alex Wilks

      Don’t leave your phone for too long, I’m pretty sure you’ll be getting an invitation to join the board of directors pretty soon

  • GP007

    It’ll be cheap, and MS does get some things that are of value, well, like flickr for example.

    • rsgx

      Not to mention the millions of yahoo.com email users.

  • Anonymous

    I don’t see a great value in Yahoo, why should Microsoft even bother to buy it?

    • http://twitter.com/alexh2o Alex Hooren

      Exactly! Microsoft already have all they need from Yahoo with the search deal inked for the next 10 years. The rest of Yahoo has virtually no unique value to MS. It’s the same as people saying they should buy Nokia – no point, MS has all they need from the company now without the problems of owning it.

    • Anonymous

      True! That’s what I meant.

    • J A

      With Nokia, what MS needs to do is buy NAVTEQ, the map data source owned by Nokia and used in Bing as well as many other mapping solutions out there. If they can own that then they own the golden egg and the goose.

    • Aaron

      Do they need to buy it if they already have the partnership with Nokia that allows them to use NAVTEQ services?

    • Jinge

      I see only 3 points: 
        Web-marketshare (but useless?)
        Ads
        Mail (much more advanced than hotmail)

    • Jinge

      But don’t worth the price, for sure!!!

    • Larry

      Yahoo mail more advanced that Hotmail???  Hardly.  Yahoo does not support ActiveSync.  Hotmail these days email+skydrive+webapps.

    • phil jay

      I just created an yahoo mail account just to check what i means with ‘much more advanced”… What I see is a very ugly UI that hurts in the eyes, everything pops up and dissappears and pops up again, it crashes my chromium nightly when opening a mail(the flash on the page crashes it) and it definitely feels slower than others like hotmail or gmail. so, on first striking I don’t like it :P

    • rsgx

      Other than the user-base, I agree.

    • Guest

      A renewed bid for Yahoo would almost certainly spell the end of Ballmer’s career as CEO. He’s already in enough trouble with shareholders having lost the mobile and tablet markets through inattention, arrogance, and a pathetically slow response. The stock has again tanked this year as a result. Growth is approaching nil, and of course Ballmer has lost 50% of the company’s value since he took over.

      But to play devil’s advocate, MS could probably get what’s left of Yahoo’s web/search operation for free once you sold off their foreign holdings. And while there have been some savings economies via the Yahoo and MS partnership, there would be many more if it was one company. For example, no need to duplicate accounting/HR/legal. No need to make expensive transfer payments.

  • http://windowsfaralimite.ro Cosmin Tataru

    Definitely a buy. Microsoft should take it in a blink.

    • Anonymous

      Not really, no.

  • http://twitter.com/nn_hung Nguyen Ngoc Hung

    Bing and Skype have been intergrated to the ecosystem. I dont see MS
    want Yahoo anymore. Probably Apple or Facebook will buy it :) . Apple may turn it to their own Social Network. For Facebook maybe a chat Service :)

    • Aaron

      Actually I think you may be right about Apple buying it.  It would actually make a lot of sense.  Apple hates Google and will never use Bing, so they may need to buy Yahoo just to have their own Apple search engine and maps.  They have the cash, a new leader, and a loyal cult following that they can rely on for search market share.  Considering how much Apple loves to control everything on their devices, I would be surprised if they didn’t do this, especially with how important search and maps are on any mobile device.

    • Jinge

      Just one reason against it: Yahoo doesn’t have a “high image”. It is old now, 
      Anyway I totally agree for the maps engine.

    • Aaron

      Well if Apple bought them, I doubt they would keep the Yahoo name.  Just call it iSearch, claim it is magical and new, and watch the legions of fans swarm to it.

    • Guest

      Apple doesn’t normally enter markets to be a “me too”. They leave that to MS and others. Traditional search is being subsumed into social networking and mobile platforms anyway. That’s why Google is much more afraid of Facebook and Apple than they are MS or Yahoo.

    • Guest

      Apple doesn’t normally enter markets to be a “me too”. They leave that to MS and others. Traditional search is being subsumed into social networking and mobile platforms anyway. That’s why Google is much more afraid of Facebook and Apple than they are MS or Yahoo.

    • Anonymous

      but currently yahoo uses bing for their searches..

    • Aaron

      I guess I figured they could go back to the old Yahoo search engine and spend a few billion to improve it.  But then again, would Bing/Yahoo 10 year deal still be binding if Yahoo is sold?  I don’t know enough about these large corporate mergers to answer that.

    • Guest

      There is no old Yahoo search to go back to. Most of the people who were responsible for building and enhancing it fled or went to MS.

  • http://www.facebook.com/profile.php?id=1618268197 Timothy Neinheart

    I said, although Microsoft have been using quite a lot of money for recent losses and acquisitions, buying Yahoo! is a must. They may not interested in Yahoo! anymore, but doing assure their victorious domination.

    Yahoo! Mail would give Hotmail a boost, and with lesser choices, I’d see many users would chose Windows Live as it will work closely with Windows Phone 7 and Windows 8, then Gmail would have some hard time.

    • Tuxplorer

      Hotmail (with 364 million users) is far more popular than Yahoo mail (280 million) and Gmail (191 million). Buying Yahoo will be the worst possible decision for Microsoft right now. They could have bought Yahoo 7/8 years ago. But now it’s too late. Yahoo is doomed.

    • http://www.facebook.com/profile.php?id=1618268197 Timothy Neinheart

      But rethink, will that 280 + 191 mil quite a threat?

    • Paul

      It’s highly unlikely that MS would be allowed to retain Yahoo’s email business in a MS/Yahoo merger. And email on its own is just a loss leader.

      Most of MS’s cash is overseas. If MS wanted to buy Yahoo’s search business, a better scenario for them would be to have an overseas buyer acquire Yahoo first, and then buy the search business of that company using dollars already overseas. Otherwise, taxes are due on the money as it’s repatriated into the US.

  • FairObserver

    Looks Yahoo is crawling towards the inevitable casualty for making their decisions based on ideological purity. Well when somebody positions themself of trusting Google, then they better suck it up.
    Skype, i bet lot of their employees are anti-m$, but was smart enough to ignore their hatred when it comes to business decisions.

    • Magic Mofo

      Yahoo was way to greedy. Shareholder were gonna make a profit at $31 a share I’m sure. But what did they do, asked for $37 because they were greedy and most likely high on themselves. Then MS did an amazing thing, an offered to meet them in the middle($.50 shy) at $33 a share, which I think was overpriced to begin with.

      Buying them cheap now though, I would agree that turning the yahoo emails over would be worth it. And a redirect for the site to put it in line with the 3S.

  • deal

    Google must not get it, it would be too much private data in the one place. It would mean that for years web searchers used Yahoo and never anticipated that their information would be sold to the biggest advertising company on the planet.

    • Aaron

      I don’t think Google would be allowed to buy Yahoo under anti-monopoly scrutiny.  Just look at AT&T and T-Mobile merger.  So no worries there.

    • Guest

      No need to speculate. The DOJ wouldn’t even allow them to partner with Yahoo, which is why MS ended up getting that deal (Yahoo’s first choice was Google). There’s no way Google will be allowed to buy Yahoo.

    • Magic Mofo

      AT&T will end up getting Tmo sooner or later. Its nearly the only option.
      Smaller GSM companies most likely couldnt afford Tmo.

      If Verizon bought them, they would have to spend a large amount of money on top of the purchase price to convert all of the sites over to their frequency, cutting off Tmo’s current phones. Or, dump money into Tmo’s current network and make it better for all the current customers, and in the future use the GSM/CDMA chip phones to use both networks.
       
      Sprint, would be in the same boat as Verizon…… Just a much crappier boat…. They (IMO) should just stick to buying Clears network.

      I prefer for AT&T to end up with Tmo, its a win-win for the 120+ million people. Granted, Tmo customers would end up paying more at some point. But that would get them better coverage and services.

      Although, if Verizon got them, it would make for an awesome situation for my job, they have the nicest installs at cell sites :)

    • OMG55

      With Verizon being the largest cellular provider in the world, wouldn’t the DOJ block that purchase as well? If verizon were allowed to buy T-Mo, I would see it as an injustice and bias.

  • deal

    Google must not get it, it would be too much private data in the one place. It would mean that for years web searchers used Yahoo and never anticipated that their information would be sold to the biggest advertising company on the planet.

  • Anonymous

    apple would never buy yahoo. apple doesn’t know how to sell software or services plus they are unlikely to take google down. although I would love to see them try just to see google freak out even more.

    • Guest

      Apple doesn’t know how to sell software or services? App store? OS X releases? Their success in services has been mixed. Mobileme wasn’t successful. But their mobile search has done very well. And iCloud looks pretty formidable, at least if everything works as billed.

    • Magic Mofo

      Haha. That would be funny to see Googles reaction to Apple buying Yahoo. I have a feeling that if Apple REALLY wanted to contend with Google they could do so with all that money.

  • Aaron

    Unless they can get Yahoo for only a few billion, I don’t see a point for MS to buy them.  The 10 year deal gives MS what it needs, Bing market share.  What more could they do from buying Yahoo?  Redirect people to bing.com?  They certainly better not pay the 40 billion they were willing to fork over before.

    • Guest

      If Yahoo ceases to exist, it’s not certain whether the MS agreement would stay in force. It might, but there are no guarantees. Look at the recent Nortel patent bid where MS effectively repurchased patents it had already licenses.

  • OMG55

    If MS buys it, I think it should be a joint venture between them and Facebook. They already have agreement together and MS owns interest in FB.

    • Anonymous

      Great thinking.

    • Guest

      That would be a terrible idea. The Yahoo/MS partnership already hasn’t gone very well. The growth MS expected from Yahoo hasn’t occurred, and MS’s RPS is still behind where Yahoo’s was pre-merger (which means both entities are making less money per search that they should). Adding another decision maker who is only indirectly in this specific area would only make that worse.

      The real value in Yahoo is their Asian assets. Their search business isn’t worth much. Their mail business is worth even less.

      Google can’t be a buyer because the DOJ and EU would never allow it. FB could be a buyer if they decided to go more direct into search and basically cut MS out. Apple could be a buyer, although they’re smart enough to avoid going head to head against Google and are instead focusing on mobile search, which plays to their strengths. MS would probably be interested in the search assets at the right price, not least because it would avoid the current large transfer payments. And then you have a bunch of dar horses like Oracle, HP, IBM, etc, who don’t have much web/search presense and might see this as a cheap way to address that.

      I see the ultimate buyer being a consortium (e.g. MS + Yahoo Japan’s parent), or else a single buyer (e.g. MS or Yahoo Japan’s parent) who then breaks Yahoo into pieces and sells what it doesn’t want.

    • OMG55

      make a lot of sense. For the record, I’m not a fan of MS buying yahoo, because the should have accepted the initial offer. I also don’t think MS should tie up too much of it money in purchasing it alone; the consortium would be great, but I think MS should continue to build the ecosystem.

  • Wourelia

    Yahoo stock went up 23.48% today…Its only worth 16.88/share now anyway…

    • Guest

      Yeah, 23% in a single day sucks. Let’s see, last time MS stock went up 23% in a day was when … the 1990′s?

    • Anonymous

      1 word for ya: dividends.

    • Anonymous

      1 word for ya: dividends.

    • Guest

      Annual dividend rate: 2.5%
      Year to date stock loss: -7%

      1 word for ya: loser.

  • cdbob

    “Increased market share” is indeed important…as a Wall Street euphemism for creeping oligopoly and constantly limiting consumer choice.  

    Just one example: Concentration of EMail will parallel (unless the Feds step in) what’s happened to the phone industry.The merger of MS and the big Y would pull a recently improved Yahoo email out of the consumers’ reach. MS will no doubt convert all free Yahoo mail customers to their inferior Hotmail…unless the consumer chooses GMail, the only big free alternative left in that arena (unless you count the ever-dwindling  AOL). We already pay for “free” email through harvesting of our personal info. Is paying cash on top of that for the privilege far away?

    Once upon a time, early Yahoo employees were turned into millionaires when the company successfully launched their IPO. How the e-world has changed to satisfy Wall Street at the consumers’ and economy’s expense. No new hopeful millionaires need apply.

    • Guest

      1) You don’t know what would happen to Yahoo’s mail in a MS merger. The DOJ might even require it to be sold to someone else.
      2) I use both mail systems and don’t know why you think Yahoo’s is better.
      3) “Free” services that have high delivery costs (e.g. mail) can only survive if the provider is making an associated return somewhere else (like harvesting your data). It’s a deal you either enter into or reject willingly. 
      4) If you don’t like the “free” solutions, put your money where your mouth is and buy/administer your own mail server. A few hundred dollars of hardware and in many cases “free” software and you’re in business.
      5) WTF does Yahoo’s early history minting millionaires have to do with this discussion? And those millionaires were made through stock appreciation, so don’t blame Wall St when they were the source of the money in the first place.

  • Guest

    I don’t know that buying Yahoo makes sense, unless the price is ridiculously cheap or the 10 year is at risk (MS needs the volume). But I’d love to see MS’s board use this as a wake up call and fire Ballmer who is every more useless than Bartz and has had far more time to prove it.

  • Guest

    The S&P is about to fall hard to around 900 or so. If MS is still interested in acquiring Yahoo, better to wait and buy it cheaper in a few months. No search competitor is going to get it in the interim. And any non search competitor who does will probably be more than happy to sell that part back.

  • http://twitter.com/Bizk1d1 Liam Clarke

    What is Yahoo these days?

    Microsoft could turn all their visitors into MSN visitors or they could just buy it, to get rid of it.

    I haven’t used Yahoo in years and i haven’t heard anyone talk about it either.

    Microsoft do not need an out of date service to overshadow their new 3 screens and the cloud strategy!

  • http://pulse.yahoo.com/_GI5FDQ6YISJPMUPVV6VSVV3YVY Kou

    I think it would be an interesting acquisition for Microsoft for the following reasons:

    1. Yahoo mail base users
    2. Asian market (Japan and others) – Microsoft has great services in the U.S. but sucks in the rest of the world. Yahoo will help boost their services support, specially in Asia
    3. Web know-how. Microsoft is still too focused in windows applications. Yahoo has better experience with web and provides tons of tools and APIs for web developers. Microsoft could make a good use of it for their own web applications and also to include these APIs/features on their Visual Studio product for web development.

    Given these reasons, it is plausible for Microsoft to bid for Yahoo.

  • Guest

    Photo caption should read “Who is the more useless CEO?”.