Sun, Jul 19, 2009 - Page 11 News List

Potential Yahoo-Microsoft deal revived

TECH PARTNERSHIP AllThingsD, an online technology blog, said Microsoft could pay Yahoo several billion dollars upfront to take over its search advertising business

AP AND REUTERS , NEW YORK, SAN FRANCISCO AND SEATTLE

Yahoo Inc shares rose 4 percent on Friday amid speculation it would team up with Microsoft Corp in an online search advertising partnership aimed at mounting a more serious challenge to Google Inc.

The Sunnyvale, California-based company also got a slight boost after Google released its second-quarter earnings late on Thursday.

Google executives say larger advertisers have returned to the Internet after being absent earlier in the year, raising hopes that Yahoo’s second-quarter results might not be quite as dreary as some investors feared.

Yahoo and Microsoft had met in the Silicon Valley this past week and could sign a deal as early as this week, said AllThingsD, a technology blog that cited unnamed people at both companies.

The blog said a deal would involve Microsoft paying Yahoo several billion dollars upfront to take over its search advertising business and guarantee certain payments back to Yahoo.

Kara Swisher, co-executive editor of AllThingsD, said a group of high-powered Microsoft online executives flew to Silicon Valley on Thursday to iron out remaining issues related to technology deployment. They included senior vice president of the online audience business group Yusuf Mehdi, search head Satya Nadella and top digital executive Qi Lu.

Yahoo and Microsoft declined to comment. Yahoo is scheduled to report quarterly results on Tuesday and Microsoft on Thursday.

The two companies have talked about cooperating for months, after Microsoft’s bid to buy Yahoo was rebuffed last year and Yahoo’s attempt to seal a search advertising deal with Google Inc fell apart under regulatory scrutiny.

But Yahoo CEO Carol Bartz has said she will join forces with Microsoft if the price is right and she is convinced her firm will still have adequate access to search data.

She said in May that any deal to spin off or combine its search assets will require a partner with “boatloads of money.” She said at the time that Yahoo was talking “a little bit” with Microsoft, but gave no details.

Bartz is currently out of the office for two weeks, following knee replacement surgery, said an e-mail that she sent to her employees earlier this month.

Activist investor Carl Icahn spoke on Friday in favor of a search deal between Yahoo and Microsoft, as talks between the two companies appeared to regain momentum.

Icahn declined to comment on the state of any negotiations between Yahoo and Microsoft. He had tried to broker a partnership between the two companies last year, when talks on Microsoft’s US$47.5 billion takeover bid for Yahoo fell apart.

“I’ve been a strong advocate of getting a search deal done with Microsoft,” Icahn, who owns about 5 percent of Yahoo and is a director on its board, said on Friday.

“It would enhance value if a deal got done, because of the synergies involved,” he said by telephone.

The potential for a deal helped drive Yahoo shares up US$0.65 to close at US$16.84.

Shares in Redmond, Washington-based Microsoft fell US$0.15, or 0.6 percent, to close at US$24.29, while Mountain View, California-based Google lost US$12.35, or 2.8 percent, to US$430.25.

Yahoo’s search engine currently holds a nearly 20 percent share of the US market, leaving it a distant second to Google’s 65 percent, according to comScore Inc. Microsoft ranks third with 8 percent.

Also See: Microsoft takes on its skeptics in the Web search world

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