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June 12, 2008

Yahoo says Microsoft talks have ended

Posted by David Hunter at 5:46 PM ET.

The soap opera continues as Yahoo announced that the second round of talks with Microsoft have ended because a) Microsoft no longer wished to acquire all of Yahoo and b) Yahoo did not want to sell only its search business which Microsoft did want. Can this be the end of Microsoft’s involvement in the continuing travails of Yahoo? Unless Carl Icahn miraculously wins his Yahoo proxy fight and comes knocking on Steve Ballmer’s door, the answer is hopefully yes.

Update: Microsoft’s statement basically confirms the above and says they are still willing to discuss Microsoft’s proposed "alternative transaction."

Update: The other shoe drops – Yahoo! to Strengthen Competitive Position in Online Advertising Through Non-Exclusive Agreement With Google:

The agreement will enable Yahoo! to run ads supplied by Google’s AdSense for Search and AdSense for Content services next to Yahoo!’s internally generated paid search and algorithmic search results. Yahoo may also run Google-supplied ads on non-search Yahoo web properties, as well as on current members of its partner network. The agreement has a term of up to ten years: a four-year initial term and two, three-year renewals at Yahoo!’s option. It applies to Yahoo!’s operations in the U.S. and Canada only. Advertisers will continue to pay Yahoo! directly for clicks served by Yahoo! from Yahoo!’s Panama and Content Match marketplaces. Advertisers will pay Google directly for each click on Google paid search results appearing on Yahoo! owned and operated network or certain affiliate sites. Google will share a percentage of such revenue with Yahoo!.

In addition, Yahoo! and Google agreed to enable interoperability between their respective instant messaging services, bringing easier and broader communication to users.

The agreement allows either party to terminate the agreement in the event of a change in control of either party. The agreement also requires Yahoo! to pay a termination fee if the agreement is terminated as a result of a change in control that occurs within 24 months. The termination fee is $250 million, subject to reduction by 50 percent of revenues earned by Google under the agreement.

Although Google and Yahoo! are not required to receive regulatory approval of the deal before implementing it, the companies have voluntarily agreed to delay implementation for up to three and a half months while the U.S. Department of Justice reviews the arrangement.

Yahoo gets to choose the search/content terms where Google ads will appear, but expects to pick enough to realize "an approximately $800 million annual revenue opportunity" with "$250 million to $450 million in incremental operating cash flow" in the first 12 months. Sure it’s embarrassing that Yahoo’s vaunted Panama system can’t monetize their own properties as well as Google, but cash is cash.

Filed under Acquisitions, Coopetition, Google, Microsoft, Yahoo

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7 Responses to “Yahoo says Microsoft talks have ended”

  1. Microsoft postscript to second round of Microsoft-Yahoo acquisition talks | Microsoft News Tracker Says:

    [...] 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: [...]

  2. Microsoft News Tracker Says:

    Microsoft and Yahoo: The deal that would not die

    Just when Microsoft shareholders were breathing a sigh of relief over dodging the Yahoo merger/search acquisition bullet, today there are rumors that Microsoft and Yahoo are talking again about some sort of deal. Techcrunch says it is a full buyout di…

  3. Google and Yahoo to spar with Microsoft in Congress on Tuesday | Microsoft News Tracker Says:

    [...] Kawamoto reports at CNET on the upcoming Congressional fireworks related to Yahoo’s proposed search ad deal with Google: Top legal counsel for Yahoo, Google, and Microsoft will address a Congressional hearing Tuesday, [...]

  4. Yahoo acquisition soap opera goes to Washington | Microsoft News Tracker Says:

    [...] Callahan (Yahoo’s General Counsel) all delivered predictable prepared testimony as to whether Yahoo’s search advertising deal with Google indicated creeping monopoly or was just an ordinary business transaction that would provide better [...]

  5. DOJ hires outside litigator to examine Google antitrust case | Microsoft News Tracker Says:

    [...] the last part is the rub of course, since overturning the Google-Yahoo deal (which Microsoft has vociferously opposed) would only really hurt Yahoo, while an investigation of [...]

  6. Neelie Kroes wants a piece of Google-Yahoo | Microsoft News Tracker Says:

    [...] Yahoo’s proposed deal with Google to run some Google search ads may be only for the USA and Canada, but European Union Competition Commissioner Neelie Kroes has apparently spotted something there to raise her hackles: European Union antitrust watchdogs are looking into a planned deal between Internet giants Google Inc and Yahoo Inc to share some advertising revenue. [...]

  7. Google-Yahoo ad deal off, Microsoft in the wings? | Microsoft News Tracker Says:

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

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