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The New Terms In Deal Talks Between Microsoft And Yahoo

Various reports say a Microsoft-Yahoo (NSDQ: YHOO) deal is (finally) close, but more interesting perhaps than the exact timing is a report from AdAge that suggests that the structure of a final deal has changed significantly. Now off the table according to the report: a big upfront check. According to AdAge, Yahoo has asked “for several hundred million” upfront — and even that has been a source of dispute among the two parties, helping to lead to a “breakdown” in talks last week. Yahoo is likely to get other sweeteners, of course, including big revenue guarantees, the ability to sell search ads both on Bing.com and on Yahoo, and the opportunity to outsource all of its search technology to Microsoft (NSDQ: MSFT). (That alone could save the company between $500 million and $700 million a year, according to Yahoo CEO Carol Bartz).

Previous reports have suggested that Yahoo was seeking a lot more money upfront than several hundred million dollars — some reports said the figure was several billion dollars. Bernstein & Co. analyst Jeffrey Lindsay said in a report earlier this month that “in a recent discussion we had with Yahoo’s CEO, she stated that Microsoft would have to offer at least $5 billion upfront to satisfy Yahoo!’s board.”

But Yahoo likely can afford to wait to get its cash. One metric that actually increased during its earnings report last week was its cash pile, which grew to $4.2 billion, up from $3.7 billion during the first quarter of the year. With Microsoft’s own ballooning cash hoard of $31 billion, you would think, however, that a demand for a “several hundred million” upfront payment would not be much of an impediment to a deal. AdAge, however, reports that some other elements are also still in question, including how exactly to split revenue for different searches and how the two sides will share search data.

One Response to “The New Terms In Deal Talks Between Microsoft And Yahoo”

  1. Wow! Finally Microsoft has reached a deal Yahoo for an internet search partnership. Will the newly announced deal between giants Microsoft and Yahoo be a good thing? Got to wait and see. But atleast Microsoft and Yahoo deal is straightforward and not complex at all and ofcourse, the negotiation talks have been going for long. I was just curious to know all the past negotiations between Microsoft and Yahoo so collected all the articles and links (more than 200) related to the current merger and the previous events or negotiations between Microsoft and Yahoo. If you are interested check the link below.
    http://markthispage.blogspot.com/2009/07/saga-of-microsoft-and-yahoo-from-2007.html