Microsoft’s Yahoo Alternative

    May 19, 2008
    WebProNews Staff

Carl Icahn’s threat to takeover Yahoo’s board may have worked to get the two sides talking about a deal, though not the full-scale acquisition Microsoft first raised in January.

Not all of Yahoo landed on the negotiating table this time. Last week’s un-gentle nudging of Yahoo to make a deal with Microsoft by Icahn yielded a return to talks by the two sides, even though Microsoft CEO Steve Ballmer previously stated his company moved on from those chats.

Both companies released statements about their newfound interest in wheeling and dealing, with Microsoft saying they are “considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo.”

That alternative doesn’t rule out Microsoft purchasing Yahoo. Microsoft alluded to Icahn’s declaration of a plan to engage in a proxy fight for Yahoo’s board, which would result in a much friendlier environment for a Microsoft takeover.

“Yahoo has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo at this time,” said the Yahoo response to Microsoft’s statement.

Confirmed details elude the blogosphere about these new discussions. However, John Furrier suggested the two companies planned to work out a deal where Microsoft picks up Yahoo’s search advertising business only.

The Wall Street Journal suggested this would be a defensive move to keep Google away from delivering Yahoo’s search ads. Given Google’s dominance of contextual search advertising, that company may be hard-pressed to overcome certain antitrust complaints in a deal with Yahoo.

As both Microsoft and Yahoo vastly trail Google in search and advertising, a pairing to create a stronger competitor to Google probably does not contain as great an interest for Justice Department regulators.