The latest talks clearly suggest Microsoft lacks a Plan B to compete with Google in search, while Yahoo is feeling the heat from Carl IcahnWhen Microsoft announced May 3 that it was dropping its $47.5 billion bid for Yahoo (BusinessWeek.com, 5/3/08), executives said the company had "moved on." Clearly, the company has barely budged.
Microsoft's May 18 announcement that it's discussing a different transaction—not an outright acquisition—with Yahoo shows how desperate Microsoft (MSFT) is in efforts to contend with Web search juggernaut Google (BusinessWeek.com, 5/8/08). "Microsoft really does not have a Plan B, especially to win in search marketing," says Collins Stewart analyst Sandeep Aggarwal. Adding to pressure on Microsoft is the prospect that Yahoo (YHOO) may soon strike its own Web search-related deal with Google (GOOG).
Discussions between Microsoft and Yahoo likely involve some combination of the companies' search operations. In April, when Microsoft executives traveled to California to negotiate an acquisition, their Yahoo counterparts proposed a more limited partnership, focused on putting together search businesses, according to one source. Microsoft was more interested in buying the company outright, so those discussions didn't progress—though they appear to have taken on new life amid pressure from billionaire investor Carl Icahn, who has nominated a slate of directors he hopes will replace Yahoo's board and be more amenable to a Microsoft buyout (BusinessWeek.com, 5/15/08).
Read More
