Yahoo/Microsoft The Never-Ending Story

Rich Tehrani : Communications and Technology Blog - Tehrani.com
Rich Tehrani
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Yahoo/Microsoft The Never-Ending Story

I am not sure I have the attention span to follow the love/hate story that is the Microsoft/Yahoo/Carl Icahn/Rupert Murdoch relationship acquisition/merger/whatever -- but it seems that as of this moment, Yahoo has once again rejected Microsoft's proposal -- this time -- a proposal to restructure.

Rupert Murdoch weighed in by saying News Corp will not be involved in any Yahoo deal and furthermore, Yahoo and Microsoft will not end up with any deal.

Yahoo for its part is communicating to the world about the matter through press releases and the latest one claims that Carl Icahn/Microsoft gave Yahoo less than 24 hours to accept a take-it-or leave-it deal that would be of higher risk, complexity and lower financial value than the deal Yahoo signed recently with Google.

In addition, the board apparently was not happy with the Microsoft/Icahn proposal's requirement that the board and the senior management take a hike. They say, this massive change would destabilize Yahoo.

Here are some other points made by Yahoo:

-- The revenue guarantees suggested, which are conditional and subject to reduction, are well below the search revenue that the Company is expected to generate on its own and in association with its announced commercial agreement with Google. That agreement alone is estimated to generate $250 to $450 million of incremental cash flow for the first twelve months following implementation, while allowing Yahoo! to remain a principal in paid search;

-- The success of the remaining Company is critically dependent on Microsoft's ability to effectively monetize search;

-- Microsoft/Icahn's proposed Traffic Acquisition Costs rates are below market;

-- The proposal calls for Yahoo! to sell its industry-leading algorithmic search business and its related strategic and valuable intellectual property portfolio for no incremental consideration; and

-- Many of the components of the headline value that Mr. Icahn and Microsoft put forward, such as the spin-off of the Yahoo!'s Asian assets and the return of cash to stockholders, are steps that could be taken by Yahoo! on its own and the Board continues to evaluate these options.

I would imagine, many of you are as sick of reading about this story as I am but the soap opera nature of this whole love triangle (what comes after triangle... square, pentagon, token ring?) makes it of great entertainment value.

I do believe that Yahoo needs a major shake-up and they need to totally restructure and start acting like they care about their shareholders. Still, I can't say for sure that a deal with Microsoft would be better for the company. Yahoo has proven they can build hoards of traffic and Google has the world's best ad network (as measured by participating advertisers). Perhaps the best deal for all involved is to let Yahoo keep building traffic and let Google leverage its ad network for the benefit of customers and shareholders.



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