Yahoo! and Google Team Up as Microsoft Deal is Off for Good

Yahoo!'s announcement said:

Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today announced that discussions with Microsoft regarding a potential transaction -- whether for an acquisition of all of Yahoo! or a partial acquisition -- have concluded. The conclusion of discussions follows numerous meetings and conversations with Microsoft regarding a number of transaction alternatives, including a meeting between Yahoo! and Microsoft on June 8th in which Chairman Roy Bostock and other independent Board members from Yahoo! participated. At that meeting, Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested.

With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders.

As we know, Microsoft had been interested in an "alternative" transaction and that would be the above-mentioned search business acquisition.

Microsoft issued a terse press release. All it said was:

“In the weeks since Microsoft withdrew its offer to acquire Yahoo!, the two companies have continued to discuss an alternative transaction that Microsoft believes would have delivered in excess of $33 per share to the Yahoo! shareholders. This partnership would ensure healthy competition in the marketplace, providing greater choice and innovation for advertisers, publishers and consumers.

“As stated on May 3rd and reiterated on May 18th Microsoft was not interested in rebidding for all of Yahoo!. Our alternative transaction remains available for discussion.”

The day of press releases ended with Yahoo! announcing a non-exclusive ad deal with Google.

Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, announced today that it has reached an agreement with Google Inc. that will enhance its ability to compete in the converging search and display marketplace, advancing the company's open strategy. The agreement enables Yahoo! to run ads supplied by Google alongside Yahoo!'s search results and on some of its web properties in the United States and Canada. The agreement is non-exclusive, giving Yahoo! the ability to display paid search results from Google, other third parties, and Yahoo!'s own Panama marketplace.

Under the terms of the agreement, Yahoo! will select the search term queries for which - and the pages on which - Yahoo! may offer Google paid search results. Yahoo! will define its users' experience and will determine the number and placement of the results provided by Google and the mix of paid results provided by Panama, Google or other providers. The agreement applies to paid search and content match and does not apply to algorithmic search. The agreement also applies to current partners in Yahoo's publisher network.

As you may recall, a prior test had favorable results, and Global Markets analyst Mark Mahaney has previously stated that such a deal could increase Yahoo!'s cash flow by more than $1 billion a year, because Google generates much more revenue for each query than Yahoo!'s does.

After the announcement re: Microsoft, Yahoo!'s stock finished down 10%. The announcement about Google, made after market close, has had little / no effect on after-hours trading. Microsoft stock finished up 4% today.

And - to be honest - I don't feel Icahn will stand still for this.

Source: By Tech Ex http://technologyexpert.blogspot.com/