AT&T turned the Wall Street Journal (behind paywall – see Gigaom as well)) into a marketing tool today, planting a story that it’s long and successful DSL partnership with Yahoo is in jeopardy. Yahoo needed this like they needed a hole in their head, as CEO Terry Semel is still reeling from a recent stockholder action calling for his immediate dismissal.
At stake is $250 million/year in high margin revenue for Yahoo, which receives a monthly fee for every AT&T SBC DSL subscriber from the joint venture. AT&T wants all, or at least more, of that revenue to stay with them, and today’s threats are the first public volley in renegotiations around the deal. The current deal terminates in 2008.
From the article:
AT&T now wants to overhaul its Yahoo deal, according to a person familiar with the issue. Instead of paying Yahoo a percent of the revenue from its broadband business, AT&T wants to offer Yahoo only a cut of revenue from the sale of products Yahoo provides, such as from its music and photo services, this person says.
One reason AT&T now believes it shouldn’t have to share broadband subscription revenue is that the phone company has been approached by other Internet companies offering to pay to reach its broadband customers, says the person. Google over the past year has played a high-profile role in paying companies that help expand its online services and advertising. Those offers, bankrolled by Google’s Internet ad success, have roiled the market for deals structured like Yahoo and AT&T’s — as Google pays partners rather than charges them.
And while this article was clearly planted by AT&T execs, the companies official position remains that the deal is “the most successful partnership in the industry.”
Why, then, has AT&T “quietly painted over its colorful vans, expunging the Yahoo logo; the vans now sport AT&T’s new blue insignia alone”?
$2.2 billion in Yahoo market cap vaporized today, as the stock fell over 5%. What’s at stake here is more than Semel’s job. For Yahoo to stay an independent company, some good news needs to break. The barely suppressed whispers around silicon valley suggest that if the stock falls further and stays there, Yahoo will become acquisition fodder for Microsoft or others.
What if AT&T bought Yahoo? That would throw everyone for a loop, haha!
Maybe they can stress them to the point that Yahoo cracks. I don’t know. I predicted it here, if it happens!
Michael,
Put on your Drudge Fedora and investigate further. Microsoft certainly does look stronger as Yahoo looks weaker. What are their relationships to AT&T, if any? What’s the scuttlebutt?
Inquiring minds want to know!
I thought this WSJ piece was one of the more interesting ones I’ve read in a long time. It’s pretty amazing how web dynamics have changed since the dog days post-bubble when this deal was struck and it seemed Yahoo, eBay, and Amazon were about all that was left. At the time it was a great partnership for both sides but now is just an insane deal for Yahoo!
Yahoo’s market cap is $10 billion MORE than AT&T’s. Does anyone really think AT&T is in a position to acquire them? Yahoo is not in play.
Unfortunately for Yahoo, there can be only 1 key player in any industry and their problem is they haven’t focused on that industry.
Google owns online advertising.
MSN owns the browser and all your software (at least 90% of it) and can effortlessly direct users to their online properties.
Yahoo has a very popular email program, but this is not a significant source of revenue growth. Yahoo has other great online properties such as flickr and answers, but these aren’t huge income producers.
before long, google will do a hostile takeover of yahoo.
I think Yahoo does have an ace up its sleeve with Panama. It is doing better than expected and should help Yahoo’s bottom line. I don’t think they are going to be acquired anytime soon.
@ #4
T – Market Cap: 228.22B
YHOO – Market Cap:39.50B
39.50 – 228.22 == 10 ???
Ed eats companies of YHOO size for breakfast.
TomF’s an idiot. ATT might as well round out its lunch with YHOO and fire Temel. Integrate yahoo’s content into ATT’s delivery and it’s game over. Have the iPhone be on ATT’s GSM network, push with YHOO mail and content, and then charge everyone via ATT’s phone bill and blanket metro markets with ATT WiFi all the while pimping Panama left and right.
And THAT ladies and gentleman would be the GOOG killer.
Google should buy Yahoo!. Wouldn’t that be a sweet bit of poetic justice? “You refused to buy us for $3 billion in 2001. OK, that’s fine. We’re buying you out.”
I could also see Yahoo! as a good play for AT&T, but then that could scuttle their co-branding deal with Verizon.
If Yahoo! doesn’t want to be gobbled up by Google and doesn’t want to buy Facebook, and I’m not convinced they need Facebook to succeed (they just need a decent social networking and blogging platform that doesn’t suck so bad like Yahoo! 360 which they could get a lot cheaper in Six Apart Ltd.), they should do a merger of equals with eBay. The combined company could be called eBay Yahoo! Inc. As a side benefit, in determining the stock conversion calculations, they could use the opportunity to ensure they have substantially less outstanding shares post-merger than the two parts would have separately – without the expensive stock buyback or publicly embarrassing reverse stock-split.
So, I’d favour the last option, eBay Yahoo! Inc. Semel can save face and continue to serve as non-executive chair of the combined company; Meg Whitman can serve as CEO and Sue Decker gets President & COO.
What do you guys think?
Cheers,
Doug
LOL.
Yahoo needs a social network like I need cancer. The company’s sliding with all the bullshit services that they’re overburdening themselves with. The final nail in the coffin will be the day they overpay for Facebook in a desperation hail mary.
Interesting, tomf was probably consulting gfinance which does show att’s mkt cap at 29.37B, while reuters lists it at 229.2B…hmm
The WSJ article actually discusses a possible merger that y! reportedly blew off.
I’d rather see comcast acquire them while rolling out their MVNO business on the sprint network. That company is way too conservative about the telco’s move into their “protected space”.
This was simply an attempt by ATT to rattle yahoo. An att purchase of yahoo is likey in the cards for this year. Google doesn’t need yahoo.
The yahoo/verizon deal wouldn’t be in jeopardy because att dsl and verizon dsl don’t compete head to head in any meaningful manner. Having said that, I think VZ is sniffing around for a Google content/portal/marketing/cobranding deal anyway after they complete the buy out Vodafone’s share of VZW.
I guess we’ll do our own investigation… Devaluing Yahoo would seem to benefit Microsoft if it hopes to acquire. On the other hand, AT&T is facing down MS in court over patents:
http://news.yah...rg/aviphegnrn6g
And are blaming them for delays in IPTV roll-out:
http://media.se...m/article/25210
So maybe they are making a play to take the prize from MS? Talk about hardball.
@ #7 + #9
Why is everyone so hyped about Panama? It’s simply a better tool for ad creation than they had with Overture. However, it’s still not as good as AdWords. More importantly, it’s ad *distribution* not ad *creation* that matters. They’re losing the ad distribution battle. Lost AOL deal in 2002, MSN in 2006, now Friendster in 2007. Didn’t make deals in 2006 with MySpace, Youtube and Facebook while GOOG and MSFT did.
You know what they’re doing instead? They’re using parked domains and spyware as their ad distribution channels. They’re being cheap. Refusing to buy companies to secure distribution or pay for ad partnerships. They’re selling out their advertising base. At some point, this strategy is going to fail. Pretty lame. It’s the Sausage Manifesto and not the Peanut Butter Manifesto that will be YHOO’s problem in 2007. I’d like to hear meaningful discussions about the merits of the yahoosyndicationfraud.com class action than the Panama hype.
BTW, if anyone from Yahoo! happens to read TechCrunch, make sure there’s an option in Panama to choose only PPC ads on Yahoo! properties. With Google, you can opt out of both their search and content networks and only distribute ads to Google search. That’s the type of feature you “forgot” to emulate with the Y!SM upgrade. Think more about the ad distribution (both in terms of quality and quantity) now that the ad creation process has been improved.
BTW, if anyone from GOOG happens to read TechCrunch can they explain why their AT&T market cap # is off by $200 Billion? Accuracy is apparently a feature you “forgot” to emulate with the addition of GOOG finance…
(to the goog fanboys who actually use G finance instead of the vastly superior Y finance, you and your money will be easily parted…)
today was a classic shake-out using the time tested strategy of a stop run. nothing more.
NAZ market makers saw the dow jones story before market open and decided to mark it down for a gap down on the open this morning so it would trigger off a bunch of stop loss orders placed by nervous and weak willed longs, and a few momentum short sellers came in as well. MMs had to do something because legg mason is still buy up a ton of shares at a good price before the run up when panama revenue hits the books.
shakeouts typically happen on ‘bad news’….its the only way really.
this is one of the oldest games on the street.
yhoo will be higher very soon.
shorts made a few dollars today, but the big money is on the upside long-term.
btw, any of you aware of the bad blood between dow jones and yahoo?? all the other ‘news outlets’ got it from dow jones and then out their own spin on it.
telecom companies have always “kill everyone” strategy. always some problems. yahoo is too slow, too old, too big with everything. both companies are worth that.
i’m still looking for telecom with “do no evil” attitude.
I will be very sad if Yahoo is acquired and I think that would be a significant mistake on the part of the company. Yahoo is still the major competitor for Google – MSN/Live is still not up to the task. I think Yahoo still offers a wide variety of valuable services and have it set as my start page rather than Google (which I had set as the start page for a year or two).
If AT&T acquires Yahoo then Google is in big trouble. AT&T and Verizon owns the country.
New AT&T customers will be pushed to the content & services of their new partner, probably Google or MSN.
But what will happen to existing customers who enjoy Yahoo services? Most of these services were free anyway, but I don’t think all were. Can anyone list premium Yahoo services that AT&T subscribers enjoyed?
AT/T or MS acquiring Yahoo! would be massive (obviously). MS already “owns” the desktop space for all intents and purposes. Imagine the integration that could be possible between desktop and web interface if they had Yahoo! tech and user base.
CM Barnes…. well…
ATT Yahoo subs get free access to CA’s desktop security product, Launchcast ‘plus’ music streaming, and a 2 gig yahoo mailbox without any ads. Many moons ago we used to get 5 free premium S&P stock reports per month but now those cost $25 each.
Nothing that most people wouldn’t miss.
I have a home DSL subscripition via ATT which comes with a Yahoo! login and home page. I mention this because I rarely use the Yahoo! services that come with – meaning, Google is my home page, and Gmail is my email. My Yahoo! email address is so choked with spam I never use it. I think the benefit to ATT and having this Yahoo! partership is questionable in my case.
i figure a takeover of yahoo in the mid term (next three years) is highly unlikely
and at&t takeover of yahoo isn’t going to happen, i doubt anyone at the “table” (at&t, yahoo, all individual and institutional investors, the fcc) sees this as desirable. as big as they are, at&t must realize that yahoo competes in markets far too volatile for them to try to engage.
a google takeover of yahoo likewise makes little sense. google’s products outside of search are accreting users on their own merits, i doubt there is any real value to buying the competition, particularly in loss-leader categories like email.
maybe i would say microsoft, since yahoo would immediately push them into nontrivial relevance online and would help transform the company away from desktop and server software.
BUT, and this what what all you knuckleheads forget, no one gets bought for their current market cap. do you think yahoo will be bought for $40b because their market cap is $40b? there is going to be a serious premium to pay, yahoo would not be sold today for anything less than $80b. this is a company that is still growing, an acquiring party has to pay for that growth. any offer under $60b likely would be met with a phone hangup. $80b is serious cash for microsoft. at&t or google, certainly not a number to balk at.
@CVOS: “Unfortunately for Yahoo, there can be only 1 key player in any industry and their problem is they haven’t focused on that industry.”
I disagree. Tell that to Lowe’s, Wells Fargo, HP, Chevron, or any one of thousands of companies earning record corporate profits without being the one key player.
If anything, the Internet with its still boundless growth has more opportunity than any other industry to support multiple profitable players in each service, be it search, content, ad distribution, or anything else. Who is the “key player” in browser technology — you say it’s Microsoft, but their market share is hardly dominant.
Looks nice but whats the point if you cant access data quickly.http://www.vob-converter.com
I hate AT&T. I would love to see someone suck the life out of that monster and leave it laying like a beached whale on the sand.