More Microsoft Yahoo Gossip

    November 30, 2008
    Chris Crum

It seems that people really want Yahoo and Microsoft to get a deal done. Almost every other day it seems, rumors surface and are just as quickly shot down regarding the two companies and a possible transaction that could put a thorn in Google’s side.

jerry yangAs you’re probably well aware by now, Microsoft offered to buy Yahoo earlier this year, then pulled out after Yahoo resisted, and then appeared to go crawling back after a failed advertising deal with Google and a plummeting of stock value. Recently Yahoo CEO Jerry Yang was reported to be departing from his role with the company and naturally the chitter chatter about a possible Microhoo deal emerged yet again. And was shot down again by Microsoft, though an interest in Yahoo’s search business is still evident.

The latest gossip to circulate stems from an article at Times Online, which reports that Microsoft is in talks to acquire Yahoo’s search business for $20 billion. Unsurprisingly, this report has been yet again shot down. BoomTown (of the Wall Street Journal network) writer Kara Swisher dismisses it as "total fiction" after BoomTown spoke with "top sources" at both Yahoo and Microsoft" who deny that any such talks have been happening.

That doesn’t mean that they won’t though. Despite the constant back and forth of whether or not the two companies are going to make a deal or no deal, there’s no denying that the concept makes a lot of sense from some angles. Even Swisher calls a deal more than likely at some point.

Carl Icahn"It makes sense on many levels and is supported by Carl Icahn, the Yahoo board member who upped his money-losing stake in the company last week," says Swisher. "That stock purchase should be enough of a reason for there to be no Microsoft-Yahoo search deal imminent, given Icahn would be more than well aware of it and buying up almost seven million Yahoo shares–now at historic lows–only days ago would smack of insider trading."

Swisher can’t help but acknowledge the amount of detail in the Times Online article though. The Times Online report says:

Under the terms of the proposed transaction, Microsoft would provide a $5 billion facility to the Miller and Levinsohn management team. The duo would raise an additional $5 billion from external investors.

This cash would be used to buy convertible preference shares and warrants which would give it a holding in excess of 30% of Yahoo.

It also mentions Microsoft obtaining a ten-year operating agreement for managing the search business as well as a two-year call option to buy the search business for $20 billion.

Very curious indeed. The source used to obtain this info is unclear, but it does seem awfully specific for rumor. Something tells me this is only getting started. It’s going to be hard to truly believe anything we hear until we see something official from the parties involved.