At this point, everybody and their mother has looked at ways to scuttle Microsoft’s hostile bid for Yahoo: News Corp., AOL, Google, hedge funds. Even Barry Diller sniffed around (according to two sources), as did British Telecom and Asian investors. Some have put offers on the table. but none of them pencil out.
Sources tell us that News Corp.put a variety of offers on the table last Friday after weeks of negotiations, including ones involving Google, private equity funds, and even one scenario involving Microsoft as a search advertising partner. Now the latest development is that Time Warner is putting together yet another proposal to combine Yahoo with AOL. The WSJ is reporting:
Yahoo and Time Warner had an earlier round of discussions, but talks intensified recently after Yahoo went back to Time Warner to ask for a proposal that it could take to Yahoo directors. Time Warner is putting the finishing touches on that proposal now. The people familiar with the matter say that the companies estimate about $1 billion in cost savings annually.
We heard some rumblings on Tuesday as well about renewed interest from AOL. The idea is to spin off AOL, combine it with Yahoo, and infuse some cash into the merged entity. But chances are this is just Yahoo scrambling to get some firm counteroffers on the table. Time Warner’s deal makers have been going through the numbers for more than a month and, one source says, could not make them work. Google already powers all of the search (and search ads) on AOL. Switching to Yahoo’s Panama would result in hundreds of millions of dollars less a year n revenues. That would put a mighty dent in that $1 billion in cost savings.
Time Warner desperately wants to salvage AOL, but merging it with Yahoo does not necessarily keep it relevant. Given its disastrous history with AOL, Wall Street may punish Time Warner if it tries to pull another Jerry Levin. Time Warner will come up with an offer, just as News Corp. did. But it is difficult for anyone to quite match Microsoft’s offer.
Yahoo can keep looking for that white knight to save it from Microsoft’s clutches, but its options are dwindling. Without Microsoft’s offer on the table, where would its stock be today? Google’s shares have gone down 20 percent since Microsoft made its bid. It is fair to assume Yahoo’s would have been hit harder. If Yahoo’s $28 stock turns into a $15 stock, then there really will be hell to pay.
(Disclosure:I own Time Warner shares).
(Photo via destinelee).
Any news on how this would impact Yahoo’s Hadoop strategy?
A hostile takeover attempt by Microsoft could lead to massive bad PR that may take years to overcome, especially if they are not able to turn Yahoo around.
It is sad to see one of the original innovators from the Web 1.0 days come to this end – especially coming on the heels of Netscape.
AOL too, was one of the original innovators from back in the day
I dont understand why they DONT want to get bought out by Microsoft… can someone explain it to me? The founders and manangement are rich as f*^$## already so what are they holding off for? I actually hope MSFT drops the bid becasue yahoo is sh%#$ but whatever.
microwhoo – longstanding resistance to microsoft from the 90’s. And they want a better price.
Microsoft is a great company. And so is Yahoo.
If not, why not? Higher price, sure. Love that.
I think, this is a strategy from Yahoo to increase the deal and request MS to pay higher
Yang & co don’t have anywhere near controlling stakes in Yahoo anymore so I don’t see this as becoming a prestige fight over the company. Therefore, as purely financial reasoning will decide this fight, falling stock market combined with uncertain bond market equals MS control over Yahoo.
Sorry but AOL means nothing outside US. Yahoo has to think about options globally. No one better than MS. Or at least merge with Myspace.
Its all about this two options, and from my point of view its only a matter of time that MS takesover Yahoo!. Yahoo! Q1 2008 results will accelerate the operation for sure.
my advise to Yahoo – dont waste your energy – take M’Soft deal and get on with the Job — meantime Google may take leading edge …
@microwhoo – It’s because Jerry Yang is nostalgic for the garage-shop Yahoo! from 1994. @Michael Arrington, he is holding out for a better price because of emotion, not business accumen. It is in Jerry Yang’s best interest to take the Microsoft deal because if the stock begins to drop again, his Board of Directors WILL force him out — and he will get nothing.
Microsoft made a smart step in trying to acquire Yahoo, and it will make the second smart step if it will take its offer off the table and let Yahoo slowly die and get its (MSFT’s) stock price back where it was before the offer.
Yes, Yahoo has a large user base, but this means nothing if they don’t monetize it somehow – apart from ad bucks. Most of their “innovations” died and it looks like they ran out of good products.
Yahoo is a little crazy, offer by Microsoft is a good offer.
The thing that I get furious with is people talk everyday about Yahoo’s inability to further monetize, yet demand everything to be free. Advertising cannot sustain every site on the internet Yahoo, as a private company, would be an awesome enterprise, but that’s not going to happen til the share price goes in the crapper. I hope to hell, Microsoft withdraws their bid, the stock will then tank, and some private equity firm can wrestle the company away from Yang and then rock on. OR, management should try to do a LBO. But the stock has to tank for that to happen as well. Even then it would be doubtful. People just need to accept the fact that some companies just die a natural death. This could be the case with Yahoo.
I wasn’t sure how to contact you with this (techcrunch editors or readers), but I’ve got a a half a dozen invitations to Yahoo’s Fire Eagle that I’m willing to give to the Tech Crunch community. Shoot me an email at a.yellis[at]gmail.com if you want them.
From the looks of the new AOL homepage it looks like AOL desperately wants to be like Yahoo. They might as well be on the same team since AOL copies a lot of what yahoo does.
@15, very true that Yahoo! frontpage styles have been widely copied quite often.
Microsoft should buy Yahoo. Nothing else matters
@17, Microsoft is buying Yahoo. Only that Yahoo doesn’t want to be bought (by Microsoft [for that offer]).
I’ve heard the complaints from those who don’t want to see Yahoo rolled into Microsoft, for any number of reasons (some are valid, some are not.) But seriously, rolling AOL together with Yahoo?
If MS made a behind-the-scenes offer to Yahoo a year ago, and Yahoo rejected it, they had a year to shore themselves up with the likes of AOL. Did something change in the past year where a Yahoo/AOL merger makes sense?
We all understand that Yahoo wants to get a higher price, but at what cost? Suppose MS says “no thanks”. Everyone is *betting* they wouldn’t do that, but I’m not so sure.
So, imagine Yahoo investors are left with an AOL merger instead of an MS acquisition. You know, the AOL whose search is driven by Google, the AOL of which Google owns 5%.
Why exactly is this better for Yahoo than an MS acquisition?
hello.
I think Erick is missing the point on this post. AOL does more display revenue than search revenue and their Platform A segment is really their growth segment, not search or AOL.com. Display is what Yahoo is good at so I don’t see why AOL would necessarily switch search to Panama. The point of this deal would be to aggregate display and search would be secondary. That being said, MSFT is clearly the best deal and YHOO is just hurting itself by childishly looking for a better suitor when they know none exists, at least from a shareholder perspective.
What would happen if Yahoo struck a deal with a rival of MSFT such as Redhat or Novell? Would it make it a harder buy for MSFT?
I wondering if Apple could benifit from a Yahoo partnership. The two seem more compatible with more prospect than the others.
When it comes to the Internet, pretty much anything Time-Warner touches is going down. They don’t understand it. They are a print company who still think that the Internet exists ONLY as an avenue to deliver online versions of print. Time-Warner doesn’t get it…never have…never will.
Yahoo’s board is CRAZY to fight MSFT….it’s the best thing that could happen for them right now.
I think that Amazon should make a play for Yahoo. After all, Amazon actually gets customers to buy things.
Advertisers want customers to buy their products. Amazon gets customers to buy products. Yahoo has higher name recognition than Amazon, therefore can generate greater cash flow.
Yahoo can charge for products such as retail goods, etc. Heck, they can sell anything to anyone of their users and take a piece of the commission.