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ICAHN: Microsoft And Yahoo Potentially Approaching Deal

Posted on: Monday, 20 July 2009, 06:15 CDT

American billionaire and financier Carl Icahn voiced his opinion in favor of a search deal between Yahoo Inc and Microsoft Corp, as negotiations between the two tech giants appear to be getting traction.

Icahn played the role of broker for the two companies in 2008, but was unable to hold the deal together as Microsoft’s proposed $47.5 billion takeover of Yahoo eventually broke down.

Icahn has declined to offer details on the current state of negotiations, but has repeatedly extolled the potential profitability of such a partnership.

“I've been a strong advocate of getting a search deal done with Microsoft. It would enhance value if a deal got done, because of the synergies involved,” said Icahn in an interview with Reuters on Friday.

Other sources say that the companies are on the verge of agreeing to a deal over search and online advertising that could be announced as early as next week.

The AllThingsDigital blog, the first to break the story, reports that if the deal goes through, Microsoft will most likely end up dishing out several billion dollars upfront to acquire the assets of Yahoo’s search advertising division.

Insiders say that the talks have been going on for months, as both sides have been eager to reignite last year’s failed negotiations. 

Yahoo reportedly snubbed Microsoft’s takeover bid last year, while simultaneously being courted by Google Inc for another search advertising deal.  The Google deal was eventually nixed, however, on account of heavy criticism by federal regulators.

Yahoo’s new Chief Executive Carol Bartz had stated previously in May that any potential deal involving the companies search assets would need a partner with “boatloads of money.” There’s little doubt that Microsoft Corp aptly fits that description.

Icahn, who sits on the Yahoo board of directors and whose firm owns 5.4 percent of Yahoo, has called himself a “strong supporter” of Ms. Bartz, who has been in charge since taking over Yahoo co-founder Jerry Yang’s position in January.

Bartz has proven herself an active and energetic leader in her first seven months as CEO, attempting to streamline the company by making major structural changes such as pulling the plug on underperforming websites and laying off some 5 percent of the company’s Sunnyvale, California staff.

Still, Yahoo has faced persistent financial troubles for several years and a number of investors see the company’s best hopes for long-term survival in combining efforts with Microsoft and thus creating an online presence large enough to compete with Google.

The latest discussions have revolved around the possibility of a symbiotic partnership in which Microsoft would manage search capabilities for Yahoo, while Yahoo would handle online advertising for the two online sites.

Kara Swisher, co-executive editor of AllThingsDigital, said that a team of Microsoft executives flew to Silicon Valley on Thursday to work out a few remaining details related to technology deployment.

Representatives from both Microsoft and Yahoo have declined to comment. Yahoo and Microsoft are scheduled to report their quarterly results on Tuesday and Thursday, respectively.

According to comScore, Google remains the uncontested heavyweight in the search market, dominating some 65 percent of the search market according to the most recent reports. Yahoo trailed in second place with just under 20 percent and Microsoft came in a distant third with 8.4 percent. Although Microsoft's current share in the market seems small, its newly developed search engine Bing has been met with positive reviews and is generating a lot of buzz in the industry.

On Friday, Yahoo finished regular trading on the Nasdaq up 4 percent at $16.84 while Microsoft closed 0.6 percent lower at $24.29.

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On the Net:

• Microsoft
• Yahoo
• AllThingsDigital

Source: redOrbit Staff & Wire Reports

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