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November 5, 2008

Google-Yahoo ad deal off, Microsoft in the wings?

Posted by David Hunter at 11:39 AM ET.

The Google-Yahoo advertising deal that was a relic of Yahoo’s defense against a Microsoft takeover has been abandoned because of an inability to satisfy the concerns of US regulators:

Google Inc. has scrapped its Internet advertising partnership with struggling rival Yahoo Inc., abandoning attempts to overcome the objections of antitrust regulators and customers who believed the alliance would give Google too much power over online commerce.

The retreat announced Wednesday represented another setback for Yahoo, which had been counting on the Google deal to boost its annual revenue by $800 million and placate shareholders still incensed by management’s decision to reject a $47.5 billion takeover bid from Microsoft Corp. six months ago.

Google backed off after the U.S. Justice Department said it would sue to block the Yahoo deal to preserve competition in the Internet’s rapidly growing advertising market.

“The arrangement likely would have denied consumers the benefits of competition — lower prices, better service and greater innovation,” said Thomas Barnett, an assistant attorney general who oversees the Justice Department’s antitrust division.

Without Google’s help, Yahoo now may feel more pressure to renew talks with Microsoft and ultimately sell for a price well below the $33 per share that Microsoft offered in May. Yahoo shares traded Wednesday morning at just $14.05, gaining 70 cents in a move reflecting investor hopes that Microsoft might renew its pursuit.

So will Microsoft try again at a much lower price? There are a lot of good buys in today’s depressed stock market, but is Yahoo one of them?

Filed under Acquisitions, Coopetition, Google, Microsoft, Yahoo

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One Response to “Google-Yahoo ad deal off, Microsoft in the wings?”

  1. Ballmer says no new Yahoo acquisition attempt | Microsoft News Tracker Says:

    [...] and as usual is never short of off the cuff remarks to titillate the press. His take on the rumors that Microsoft might make another attempt to purchase some portion of Yahoo was that it just [...]

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