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Comments (7)
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Yahoo Inc. offices, housing its Search Marketing Group, are pictured in Burbank, California, October 14, 2010.
Credit: Reuters/Fred Prouser
By Peter Lauria and Nadia Damouni
NEW YORK |
Wed Oct 5, 2011 4:23pm EDT
NEW YORK (Reuters) - Microsoft Corp is considering a bid for Yahoo Inc, resurfacing as a potential buyer after a bitter and unsuccessful fight to take over the Internet company in 2008, sources close to the situation said on Wednesday.
Microsoft joins a host of other companies looking at Yahoo, which has a market value of about $18 billion and is readying financial pitch books for potential buyers, they said.
Those companies include buyout shops Providence Equity Partners, Hellman & Friedman and Silver Lake Partners, as well as Chinese e-commerce giant Alibaba and Russian technology investment firm DST Global, the sources said.
Yahoo shares jumped 10.1 percent on the news to close at $15.92 on Nasdaq. Microsoft shares ended 2.2 percent higher at $25.89 after rising about 3 percent earlier.
Microsoft may seek a partner to go after Yahoo, one of the sources said, without identifying any parties.
No decision has been made and a bid may not materialize as there are internal divisions at the software company on whether it should pursue Yahoo again, a high-ranking Microsoft executive said.
One camp inside Microsoft is hot for the deal, believing that it would obliterate AOL Inc as a competitor and create a strong Web portal that can offer better products to audiences, advertisers and end users, the executive said.
However, another camp is against the deal, feeling that if Microsoft is going to invest billions of dollars in an acquisition it should be one that has more growth potential. Microsoft last tried buying Yahoo in 2008, offering to pay as much as $47.5 billion or $33 a share.
"Yahoo's value hasn't grown in years, and some executives feel we should buy something that is more forward-looking," said the executive who spoke on condition of anonymity.
Yahoo, Microsoft and the other potential buyers declined to comment.
Any auction process for Yahoo is still in the early stages, and the company's financial advisers -- Goldman Sachs and Allen & Co -- are preparing to send financial information to potential bidders, sources have said previously.
BIG BITE
Shortly after ousting Carol Bartz as CEO in early September, Yahoo said it was exploring strategic alternatives after receiving "inbound interest" from a number of parties.
The once-dominant Internet pioneer is pursuing parallel tracks, sounding out deal options as well as engaging in a search for a new CEO.
Yahoo would be a big bite for any single private equity firm, especially at a time when financing markets for leveraged buyouts have dried up.
Industry sources said private equity firms could take over the U.S. operations and sell Yahoo's Asian assets to a buyer such as Alibaba.
"There are many reasons why this thing probably makes sense," said Sid Parakh, analyst at fund firm McAdams Wright Ragen. "If you strip out the variety of assets Yahoo owns, you are pretty much paying nothing for the core business."
If Microsoft fully combined its Bing Internet search business with Yahoo's, it would give it more than 30 percent of the U.S. search market and make it a credible competitor to Google, said Parakh.
Under a 10-year deal struck in 2009, Microsoft's Bing already powers Yahoo search, but it cedes 88 percent of resulting advertising revenue back to Yahoo.
"You would get better scale on the search business, and you could probably cut a good amount of the cost, not just on search side but also on the display side," said Parakh. "There would be economies of scale."
Microsoft is making slow progress in combating Google's dominance in search advertising. According to the latest figures from research firm comScore, Google has 64.8 percent of the U.S. search market, Yahoo has 16.3 pct and Microsoft 14.7 percent.
But even with traffic from Yahoo, Microsoft still has not attracted enough advertising dollars and profitability in search is a long way off.
Last quarter, Microsoft's online services unit -- which includes Bing and the MSN web portal -- lost $728 million. It has lost almost $6.5 billion over last three fiscal years.
Some investors have expressed concerns about cultural fit and Microsoft's ability to manage such a large deal. Microsoft CEO Steve Ballmer has had an antagonistic relationship with Yahoo, and the company has never successfully integrated a large acquisition.
Its 2007 deal to buy online ad firm aQuantive for $6 billion was a flat-out failure. Its $8.5 billion deal to buy Internet phone service Skype has not yet been completed, so integration efforts have not yet begun.
(Reporting by Nadia Damouni and Peter Lauria in New York; Additional reporting by Soyoung Kim, Paritosh Bansal and Bill Rigby, editing by Tiffany Wu and Richard Chang)
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We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (7)
steve-harmon wrote:
Well, Yahoo (YHOO) is effectively trading for free. Here’s the math:
http://steveharmon.com/yahoo-yhoo-is-valued-effectively-under-1-5-billion-heres-how/
Oct 05, 2011 3:03pm EDT -- Report as abuse
vince7777 wrote:
Vince Stanzione from fintrader.net stated “hardly a surprise that Microsoft is interested again but I would think that this may be a case of 2 or 3 partners working together on carving Yahoo up as not sure if MSFT would want the whole company – The days of Yahoo as a listed company are numbered, take out price of £18-$20 would easily get the deal done”
Oct 05, 2011 3:13pm EDT -- Report as abuse
Krowster wrote:
Best idea yet, and also help keeping some technologies here at home. NO more giving away the cows as many businesses have already done.
Oct 05, 2011 3:25pm EDT -- Report as abuse
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