[AI] Google emerges from rubble of collapsed Microsoft-Yahoo

shakir syed shakirsd at gmail.com
Sat Jun 14 17:02:27 EDT 2008


Hi Renuka,
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On 6/14/08, renuka warriar <erenuka at gmail.com> wrote:
>
> The Hindu News Update Service
> default/empty
> News Update Service
> Saturday, June 14, 2008 : 0940 Hrs
>
> Top Stories
> Google emerges from rubble of collapsed Microsoft-Yahoo talks
>
> SAN FRANCISCO (AP): Microsoft Corp.'s abandoned takeover bid for Yahoo Inc.
> appears to have culminated with a disheartening thud for those two companies
> but amounted to yet another coup for online search leader Google Inc.
>
> What began in January as Microsoft's most audacious attack yet on Google
> instead paved the way for the Internet's most powerful company to gain even
> more
> clout through a deal that gives Google access to a large chunk of Yahoo's
> advertising space.
>
> By submitting to a partnership that endorses Google's search advertising
> technology as a better choice than its own, Yahoo is giving online marketers
> even
> more incentive to spend most of their money with its biggest rival,
> according to industry analysts.
>
> It looks like such a sweet deal for Google that the U.S. Justice Department
> and lawmakers are expected to take a hard look at the arrangement to make
> sure
> it doesn't give Google too much control over the Internet's search
> advertising market.
>
> Google currently has about 75 percent of the U.S. search advertising market
> followed by Yahoo at 9 percent, according to the research firm eMarketer
> Inc.
>
>
> Although they contend their alliance won't lessen competition, Google and
> Yahoo have agreed to wait until late September to begin working together so
> the
> U.S. government has more time to assess the potential impact.
>
> Even more importantly to Google, the Yahoo partnership keeps a potentially
> valuable weapon out of Microsoft's control.
>
> Without Yahoo's renowned franchise, Microsoft once again is scrambling to
> find a way to fix its unprofitable online operations and narrow Google's
> commanding
> lead in the Internet's rapidly growing ad market.
>
> Google shares gained $18.56 to close Friday at $571.51 while Microsoft
> shares added 83 cents to close at $29.07 _ an indication that some investors
> were
> relieved the world's largest software maker concluded it would be too
> expensive and troublesome to buy Yahoo.
>
> On the other side of the fence, Yahoo shareholders had been clinging to the
> possibility that Microsoft would revive its last offer of $47.5 billion, or
> $33 per share, to buy the Internet pioneer. But those hopes evaporated late
> Thursday after Yahoo disclosed Microsoft had ``unequivocally'' rebuffed an
> attempt to renew the negotiations.
>
> In a sign of investors' frustration, Yahoo shares dropped as much as $1.77,
> or 7.5 percent, Friday before rallying late in the session to finish at
> $23.47,
> down five cents. The downturn marked Yahoo's lowest stock price since it
> closed at $19.18 at the end of January, just before Microsoft launched its
> takeover
> attempt.
>
> That leaves Yahoo's market value 29 percent below Microsoft's last offer,
> which was withdrawn May 3 after Yahoo asked for $37 per share. Yahoo's stock
> hasn't
> reached that price since January 2006.
>
> At least Microsoft still has a strong, highly profitable backbone _ a suite
> of software products that run most computers around the world.
>
> Yahoo, though, may have made a Faustian bargain by hiring Google to show ad
> links next to a significant portion of the ad links appearing alongside
> search
> results on its Web site in the United States and Canada. The Sunnyvale,
> California-based company also will pluck Google ads to show on other Web
> sites
> in its marketing network.
>
> Yahoo expects its annual revenue to get an $800 million lift from the
> arrangement with Google while still showing show the majority of its own ads
> alongside
> its own search results. But most analysts viewed it as an act of
> desperation, asserting it's only a matter of time before advertisers shift
> all their business
> to Google because they know their messages will show up on Yahoo either
> way.
>
> Deutsche Bank analyst Jeetil Patel described Yahoo's decision to farm out
> advertising to Google as ``one of the worst strategic maneuvers seen in the
> Internet
> industry.''
>
> Google will get such great access to Yahoo's highly trafficked Web site
> that it should be able to gather more insights about the correlation between
> search
> requests and advertising, ThinkPanmure analyst William Morrison wrote in a
> Friday research note titled ``Giving Away The Store (To Google).''
>
> And that additional data could help Google further improve its advertising
> formula to become an even more compelling marketing magnet.
>
> The partnership also cast doubt on a turnaround plan Yahoo co-founder Jerry
> Yang began drawing up year ago after he replaced Terry Semel as the
> company's
> chief executive.
>
> A big part of that strategy hinged on Yahoo becoming a ``must-buy'' for
> advertisers _ a strategy that the Google deal appears to contradict.
>
> ``This raises very important questions about the long-term vision for
> (Yahoo) and its place in the industry,'' said Cantor Fitzgerald analyst
> Derek Brown.
>
>
> Yahoo shareholders will get a chance to vent their frustration at the
> company's annual meeting Aug. 1 when activist investor Carl Icahn will seek
> to replace
> the board with nine alternate candidates.
>
> Icahn was primarily interested in selling Yahoo to Microsoft, so his
> campaign to replace the board may be hurt if he can't persuade shareholders
> he has
> other viable ideas on how to boost Yahoo's stock price. He didn't return a
> call seeking comment Friday.
>
> Yang and his top lieutenant, Susan Decker, defended the Google deal as a
> profitable move that will better position the company to capitalize on the
> Internet
> advertising market's growth from roughly $40 billion worldwide this year to
> a projected $75 billion to $80 billion market in 2011.
>
> Microsoft contends it offered Yahoo a better alternative even after losing
> interest in buying the entire company.
>
> When the latest talks broke off June 8, Microsoft was prepared to buy
> Yahoo's search operations for $1 billion and pay $35 per share to accumulate
> $8 billion
> worth of Yahoo's stock, according to an internal note sent Friday by Kevin
> Johnson, who oversees Microsoft's online operations.
>
> Microsoft also would have offered guarantees that could have boosted
> Yahoo's operating cash flow by an estimated $1 billion annually, Johnson
> wrote.
>
> Yahoo estimates the Google partnership will increase its operating cash
> flow by $250 million to $450 million annually.
>
> ``Regardless of Yahoo's decision, we will continue to move forward on our
> strategy in online services and advertising,'' Johnson assured Microsoft
> employees.
>
>
> Microsoft left the door open to renewing talks about buying Yahoo's search
> operations. Yahoo also gave itself some wiggle room by including a clause in
> the Google partnership that would end the alliance for a termination fee of
> up to $250 million.
>
> Some analysts and investors still think Microsoft eventually might try to
> buy Yahoo in its entirety, although at a price well below $47.5 billion.
>
> ``Yahoo seems to have backed itself into a corner pretty effectively here
> so it would appear Microsoft has a lot of leverage,'' said Dan Davidowitz, a
> portfolio
> manager for Polen Capital Management, which owns about 750,000 shares of
> Microsoft and 37,000 shares of Google.
>
> Davidowitz said he isn't interested in owning Yahoo's stock.
>
>
>
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