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Yahoo Rejected Microsoft Over Exclusivity Request

Too much Microsoft power worried Yahoo

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Even though Microsoft offered Yahoo a $9 billion deal to gain control of its search business, Yahoo would have been stuck with Microsoft as a search partner for ten years.

Judging by Yahoo’s letter to shareholders, that ten year term looked about ten years too long to Jerry Yang and the Yahoo board. Yahoo’s shareholder letter, released after the markets closed on June 25, explained why Yahoo thought Google made the better partner.

"This proposal…required Yahoo! to commit to a 10-year exclusive arrangement that would have made us dependent on Microsoft for all of our search business. It would also have given Microsoft veto rights on certain future Yahoo actions, including a sale of Yahoo," the company said.

Yahoo’s non-exclusive deal with Google gives them the ability to use Google search ads wherever Yahoo feels appropriate. Doing this will help the search and display ad strategy Yahoo believes will pump up its cash flow significantly by 2010.

Yahoo also asked its stakeholders to reject the proposal by investor Carl Icahn to replace Yahoo’s board during the company’s annual meeting on August 1. Since Microsoft isn’t interested in acquiring all of Yahoo per Microsoft’s public comments, there’s no need to change Yahoo’s board and add people who favor such a transaction, the logic goes.

However, Icahn in recent weeks said he saw some value in the deal with Google. It’s thought he may favor the replacement of only a few board members at Yahoo now, rather than the entire board.

Yahoo Rejected Microsoft Over Exclusivity Request
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  • http://www.squidoo.com/hillandglen hillandglen

    Jeez,

    I wonder what sort of power deals were being struck behind closed doors, or on the golf course…

    H

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