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May 4, 2007

It’s back! Microsoft rumored to crave Yahoo!

Posted by David Hunter at 8:54 AM ET.

Lots of excitement in the markets this morning as everyone’s favorite rumor came around again:

Yahoo shares rallied 15% in pre-open trading on Friday after a newspaper report that Microsoft may try to buy the Internet search firm after being beaten to other deals by Google Inc.

The source was a report in the NY Post by Peter Lauria and Zachery Kouwe:

Stung by the loss of Internet advertising firm DoubleClick to Google last month, Microsoft has intensified its pursuit of a deal with Yahoo!, asking the company to re-enter formal negotiations, The Post has learned.

While Microsoft and Yahoo! have held informal deal talks over the years, sources say the latest approach signals an urgency on Microsoft’s part that has up until now been lacking.

The new approach follows an offer Microsoft made to acquire Yahoo! a few months ago, sources said. But Yahoo! spurned the advances of the Redmond, Wash.-based software giant. Wall Street sources put a roughly $50 billion price tag on Yahoo!.

“They’re getting tired of being left at the altar,” said one banking source who has recently had talks with Microsoft. “They now seem more willing to extend themselves via a transaction to get into the game.

All things are possible, but it’s hard to see how such a combination would give the duo any real boost in their battle with Google and it would provide all the delay and confusion of merging organizations and infrastructures. It’s the kind of thing large companies do because they can, but which doesn’t address the underlying problems.

Meanwhile, acquisition or no, the two companies seem to be pals as Mary Jo Foley reports that “Yahoo’s Semel to keynote Microsoft advertising powwow.” Apparently he and Microsoft’s ad czar, Joanne Bradford, are going to share the stage to discuss “The New Network.” Maybe they found one where Google doesn’t eat both their lunches?

Update: Just before the market closed, the WSJ reported that sources say that “merger discussions are no longer active.”

Update 5/5: Another source tells today’s NY Times that talks between Yahoo and Microsoft have been going on for more than a year, but while acquisition was once discussed and rejected, the negotiation now centers around a “creative partnership.”

Filed under Acquisitions, Coopetition, Executives, Google, Joanne Bradford, Microsoft, Yahoo

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2 Responses to “It’s back! Microsoft rumored to crave Yahoo!”

  1. Cash burning a hole in Microsoft’s pocket? -- Microsoft News Tracker Says:

    [...] Not to be outdone, Peter Lauria at the NY Post is reporting that sources tell him that if Facebook won’t play, then Microsoft may go public with their offer for Yahoo from earlier in the year to stampede the Yahoo shareholders into forcing management to deal. [...]

  2. Microsoft wants Yahoo! | Microsoft News Tracker Says:

    [...] Stock prices are down and Yahoo’s share price is down even more after an awful quarterly report and ongoing organizational turmoil so now is clearly a great time for Microsoft to try bargain hunting. However, as I have observed previously, while the idea of combining Microsoft and Yahoo’s market share in search, advertising, and content Web sites and services is attractive, the significant overlap of actual offerings between the two erstwhile partners is going to be a nightmare to resolve if the acquisition goes through. Unsurprisingly, Microsoft says not to worry: The combination will create a more efficient company with synergies in four areas: scale economics driven by audience critical mass and increased value for advertisers; combined engineering talent to accelerate innovation; operational efficiencies through elimination of redundant cost; and the ability to innovate in emerging user experiences such as video and mobile. Microsoft believes these four areas will generate at least $1 billion in annual synergy for the combined entity. [...]

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