Microsoft News Tracker

Apparently feeling a bit bedeviled in the coverage of the collapse of the second round of Yahoo acquisition talks, Microsoft revealed the details of their proposed "alternative transaction" via a memo to employees from Kevin Johnson, president of the platforms and services division, which was promptly leaked to the press. The gist:

• Microsoft would have purchased Yahoo’s backroom search assets for $1 billion while continuing to serve search results for Yahoo and returning data back to Yahoo for use in their advertising business
• Microsoft and Yahoo would have entered into a long-term search partnership, where Microsoft would have provided favorable economics to Yahoo for search, including a three-year guarantee of “higher” monetization than Yahoo’s subpar Panama paid search system currently provides
• Microsoft would have spent $8 billion on buying approximately 16% of Yahoo shares at $35/share presumably to placate shareholders including Carl Icahn

Microsoft projected that this deal would  increase Yahoo’s annual operating income by more than $1 billion above its current level although some of that depends on the cost savings of shuffling the search hardware, employees, and operations off to Microsoft.

I suspect that while the money is important, the real sticking point is that the Microsoft deal has Yahoo merely displaying a "white label" search service provided by Microsoft, while the Google arrangement leaves Yahoo in control of their search service and merely dealing with Google for monetization. In many ways, search is just another form of content and if Yahoo has a new determination to succeed in the content business, selling a major chunk off to Microsoft is a poor way to start.