Things are moving fast in the Yahoo-Microsoft drama. All the different forces are aligning for an endgame. The latest twist: The WSJ is reporting that Yahoo is close to signing a deal to combine with AOL.
This at the same time that Yahoo is doing a limited test to place Google ads in its search results. Meanwhile, News Corp, which Yahoo once hoped would be its white knight, is said to be turning on Yahoo and talking to Microsoft about joining its bid. Obviously a lot of balls are up in the air right now, and anything is possible.
Here is how the AOL-Yahoo combination is shaping up, according to the WSJ:
Under the terms being discussed, Time Warner would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, the people said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion. As part of the deal, Yahoo would use the Time Warner cash and additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share
Tellingly, that $10 billion valuation is half of what AOL’s business was pegged at when Google invested $1 billion for its 5 percent stake in AOL a little over two years ago. (But that does not include the dial-up business). What we are witnessing is all sorts of contortions on both sides to make the numbers work. We’ve believed all along that Time Warner will put an offer on the table, but it will be difficult to make it pencil out, especially if an AOL-Yahoo combo is up against a three-way Microsoft-MySpace-Yahoo deal.
Each of these potential deals would create integration nightmares, but a three-way tie between Microsoft, MySpace, and Yahoo would create an entity with so much traffic and advertising inventory that it might not matter. The chances of such a complicated deal going through, though, are small. The most likely outcome is still Microsoft buying Yahoo, and this is all just fodder for the negotiations.
Microsoft not liking it…
I don’t a determined effort by M$ compared to Y! determined effort to stopping the sale to M$…. what gives?
Come on Yahoo…don’t let me down and come out of this the tech icon that you once were!
I like this better than the Microsoft or Google deals, i really don’t care what happens as long as they don’t mess with my email addresses. I’ve had 3 yahoo and 2 aol email addresses for 10 years and don’t plan on trying to find contacts and give them a new email address.
I don’t want Google at all, we need more than one major search provider i don’t care who they are as long as its more than one , any time you get one company in a market that company will take advantage of the fact no matter who they are.
How many search providers that are out there not that use there own search and haven’t outsourced to Google.
I can understand Yahoo wanting the best deal but given their approach and how this mess has played out in the media, it reminds of a relationship that is getting off on a bad footing with an inevitable end.
To the suitors I say….stay far!!!
Yahoo has outsourced their search to Google before anyway…
@kk - I second them not messing with the email addresses…
Yeah, play some games, else life becomes boring…
So they can BOTH sink??
Are we gonna get Yahoo! CDs mailed to us for free?
SURRENDER TO MSFT you guys..
thoughts that come to mind
- flailing
- arms swinging wildly
- tantrum (like a kid who does not get what they want)
yahoo is looking like an idiot these days
This is probably their last hope of getting Microsoft to raise it’s offer.
( Echoing Obi-Wan voice right after Luke blows up the Death Star in Episode IV ) “…remember, the Force will be with you…always.”
This video is more relevant now than ever: http://www.youtube.com/watch?v=x9BosxTWZE4
Your two-headed dinosaur graphic says it all.
Yeah, I bet Microsoft still ends up winning here.
This is the stupidest story I’ve ever read (not knocking the reporting of it, just the content) .
It doesn’t even make sense, esp. the part about “using Time Warner’s cash to buy back stock between $30-$40/share”. Huh ???? Don’t you usually do buybacks when the price is low, at whatever the market price is ????
Well, we have one clear indicator developed from the dotcom bubble:
A clear sign of a sure-to-be-a-loser company is when they merge with AOL.
i don’t know about all of you people ..but for me i hope yahoo still play alone
tip..for bloggers who read this ..check this out
bloggersmosaic.com
Postscript - Just found on YouTube: Microsoft vs. Yahoo
http://www.youtube.com/watch?v=St5wDSqn4aM
I am pretty sure that behind the scenes Google is playing its own cards. There is way too much at risk here for google, i doubt they will stay back and wait on this one. AOL + Yahoo will be a dumb move for Yahoo, big investment with almost nothing to gain.
Buying / combining with AOL is smart takeover defense move.
In one move, Yahoo can completely change the structure of the company and at least postpone Microsoft takeover by at least half a year.
I don’t think Microsoft would even want to go through the business of selling AOL unit if they’d buy the AOL/Yahoo after they combine, so this might make the takeover attempt go away.
If you like the idea of independent Yahoo, this is good news.
damn, now I’m craving pizza -_-
There’s a scent of desperation in this move by AOL & Yahoo, AOL has absolutely nothing to offer except sagging subscriptions and a bunch of dead money from their merger with Time Warner. Not sure where Jerry is going with this, except for the fact that he’s probably trying to cash out to the highest bidder.
http://www.feedbacksecrets.com
Yahoo combined with Microsoft = actual shot at competing with Google
Yahoo combined with AOL = bankrupt in 5 years
As much as I don’t like microsoft, Yahoo is better of with them than AOL. AOL is a 2nd class company with no recent successes worth talking about when what Yahoo needs is a strong merger to bolster it.
Irene
http://www.dragonlasers.com
AOLHOO! ==== BOOHOO!
So, did any of you read the following line?
“The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion.”
Remember, AOL does have a significant presence online, with such sites as Bebo, Xdrive, Weblogs (Engadget, etc), Mapquest, Moviefone, advertising.com and several decent size ad networks. AOL also is one of the largest free email and IM companies in the world.
All in all, a pretty decent match for Yahoo, allows them to compete with Google better than if they join with MSFT. As a stockholder, I hope they go the AOL route.
Is Msft going to raise the bid to buy the merged entity of AOL & Yahoo…
Yahoo isn’t comprised of idiots. They have thrived off of purchasing companies during their tenure as one of the elite search companies. Ask Mark Cuban.
They realize where the best road to success is and it isn’t with AOL. Think about it, if you had Bill Gates on one side and AOL on another offering you a deal, who would you side with? Who do you see the best opportunity with? An ant would even know this answer.
Yahoo is using AOL and any other suitors as bargaining power. They’ll eventually merge with Microsoft, it is just a matter of how good they are at selling themselves. I think the Yahoo crew will get close to what they originally proposed per share and after a couple of years, people will be talking about how Google still owns the majority share of search and online advertising.
cruch that
Cant view the results without voting. Clicking “view results” does nothing.
Hmmm… Seems like a business that Yahoo! could enjoy the benefits of…
“…with the most comprehensive display advertising network in the U.S., a substantial worldwide audience, and a suite of popular Web brands and products.”
and from @Keith: “Remember, AOL does have a significant presence online, with such sites as Bebo, Xdrive, Weblogs (Engadget, etc), Mapquest, Moviefone, advertising.com and several decent size ad networks. AOL also is one of the largest free email and IM companies in the world.”
With MSFT in control Yahoo!’s a pawn. By buying AOL Yahoo! remains in control.
I say AOL.
This is fun to watch in the Internet age. In the good old days, we’d just hear the endgame. This is much more fun!
The deal is getting more and more complicated. Waiting for some big news very soon.
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i wonder if it went like, “If you take this piece of shit off our hands we’ll drop you a few bucks and you can try to save that little company of yours.. sound like a deal?”
Micro… who?
THE END IS NEAR
AOL/Yahoo would be a good combo, but I don’t think it wouldn’t even come close to Microsoft alone.
http://mikesmoneyclub.blogspot.com/
As a MSFT employee (high ranking) I’m totally opposed to this deal because it will really make it difficult to compete in the search arena against Google. Adding that much dead weight to a company struggling to enhance the search solution is not the answer. That 44 Billion is better spent in a dozen of other areas including search technologoes that are superior to yahoo. Ballmer has nothing more than ego at this stage and it’s sad to see the company I help build move in this direction. I’m tired of the culture here.
great poll.
and don’t forget that google already owns 5% of aol. i’ve heard that if msft does buy yhoo (on its own), then google was planning on ponying up the rest for aol and owning it outright.
if yhoo really does just use this as a way to successfuly fend off msft, and if aol and yhoo don’t merge, watch google buy the rest of aol by this July.
make a note of it. this isn’t merely specualtion.
Google probably won’t sleep tonight with all the giggling. I always laugh at those who say that Microsoft/Yahoo would be a good alternative to Google. Oh yes, please, I don’t want the steak, some week old regurgitated cat food would suffice.
Microsoft with Yahoo is a total mess for reasons too numerous and that have been repeated ad nauseum. They would be a serious competitor to Google? A competitor perhaps but definitely not a serious one. They would trail considerably and after the merger, how would they catch up? Who else could they buy? Google would continue to gain ground on two companies that obviously can’t innovate. Such a costly deal would be a financial strain no one would want.
AOL with Yahoo makes more sense and reeks of a swift kick to the nuts to Microsoft. Would they want AOL and Yahoo? Probably not, the price would be too high for even MS and News Corp. Google wins as they remain small and continue to lose ground.
Acquisitions isn’t the answer, innovation is but the question is, is it too little too late? Absolutely. If Google can buy a company like Admob, they would have everything and be the ruler of the internet.
Jason, I was just coming to say that too - what a friggin mess.
Who thinks GOOG is just laughing and last second will come in and buy them all and then send robots to get us all?
Hahaha, that’s hilarious @25 susan bebe
Seriously…
Microsoft Myspace and Yahoo - that’s digital identity mecca. No matter where you go; you are logged in to one of those systems. Thusly, when you move around on those sites or any site they work with - POOF they know who you are. Like TC, now that I post you can track my IP/DNS with my name/email.
That three way combo will be huge, I’m sure myspace reeled in a lot of data when they put the super bowl commercials on there. I watched the R8 a few times….had they been working with Yahoo they would have known me. Not that knowing me is important, but those that know me think so…hmm - I think that is a matter-anti-matter dichotomy.
At this rate, we might call it “2012 a MiYahSpace.com odyssey”
LOL
JK
My interpretation of these manuevers are that they are YHOO’s final ploys to gain more money from MSFT. Neither are credible deals, in my mind. Net/net: MSFT will win this at maybe 10% higher price.
Here’s my rationale:
First, the more interesting of the two ploys is the AOL/Time Warner one. If I were Mr. Bewkes, newly minted CEO who plans to take over Chairman role at the end of this year, I wouldn’t get in a bidding war with MSFT on this with a 50′ pole. Two key reasons.
One, MSFT has a far better balance sheet: a ton of cash, margins that still throw off a ton of free cashflow, and effectively no debt. Time Warner, on the other hand, not so much.
Two, Mr. Bewkes is taking over a company still scarred by the historically catastrophic acquisition of AOL at the height of the bubble. I could see an argument that things are calmer now, but think about it. If you were Mr. Bewkes, would you really want your first big acquisition to be an internet juggernaut that you ‘won’ in a bidding war with Microsoft? It’d be an interesting choice, I guess, but I’m dubious. It’s more credible to me that Mr. Bewkes and TW are proving a stalking horse, ensuring that MSFT / MSN don’t get it too cheaply.
The second Goog/Yhoo ploy is, in my mind, goofy. The scenario appears here to be a short-term road test of a Google Ad Partnership, hopefully yielding data that would make a YHOO/GOOG partnership break-through or drive MSFT to a higher bid. The level of crispness and detail around this is shallow–sounds like something being hacked together last second. Are we supposed to buy that some short-term 2 week test is going to provide material data that’s going to really take things over the top? It seems particularly random, given YHOOs claim it discussed a larger partnership with GOOG in Europe last year, but decided not to last year. If the partnership wasn’t worth doing in Europe last year, why should I believe that a smaller test now is one that will make a difference now?
This “test” partnership sounds cute and spunky, but despite the name brand of GOOG being there, it just doesn’t ring true as a credible alternative.
Sum it up together, I think MSFT ups it’s bid by under 10% and gets Yahoo deal by the end of the month.
I love this deal. MSFT should just wait for the AOL-YAHOO deal to eat $hit, and then step in later to pick them both up for the same price.
ugh.. AOL?! why on earth.. seriously.. someone should stop supplying yahoo with their drugs! its getting a bit out of hand..
Microsoft should drop this yahoo bid and spend that $45+ billions on;
1. Improving their online brand, MSN.
2. Buy facebook and integrate their 250+ million hotmail users.
3. Rename all those stupid Windows Live * to MSN. Specially Hotmail, Messenger, Maps, Spaces, Groups, etc.
4. They can keep Windows Live with Writer, Mail, Photo Gallery. Also release a new product like, Windows Live Virtual Earth as a desktop product like Google Earth.
5. Buy few online start ups.
6. Put search engine in a single/separate cool type brand like google. Google is search king just for their name mostly.
7. Put all of their Advertising offering under MSN brand. Microsoft and Online Advertising just don’t match.
I just don’t get it, Microsoft have all the potential, resource, money. Why don’t they just do it.
@jjameson has it spot-on.
Yahoo has to make semi-credible feints in other directions in order to get MSFT to up its offer (or worse, not lower it _ MSFT has them in a bear hug where time works against YHOO if they do nothing).
MSFT is playing hardball, of course, because we’re talking about $1.4 billion in real extra money they have to pay for every $1 per share they raise.
The News Corp. combo scenario can be used to help MSFT save face if it does up its offer after all the tough talk.
Further, it’s an embarrassment for the WSJ to let itself be spun by the investment bankers for Yahoo who are leaking this to them.
OK - I know lots of you own MSFT shares (and won’t admit it) or whatever and need the purchase to go through and you are probably right that it eventually will but…
Do people really think it helps either company at the end of the day?
Maybe Y! can do better on their own?
Maybe Y!+AOL can do better?
Maybe Y!+M$ can do better?
Maybe Y!+TechCrunch can do better?
Maybe there is no hope?
Just admit it that none of you losers can predict the future so stop arguing about something that you have no control over!
Microsoft hate the news….
The experiment is google is the most interesting one. I don’t think they will learn anything that they don’t already know. That google gets more clicks per search term than yahoo. This just give them the ammo to show msft that there is a lot of upside in improving the ad relevance for text ads on yahoo and thus yahoo deserves more money since the revenue growth estimates would be much higher than what msft is assuming in its bid.