According to BW’s Gene Marcial, negotiations from Yahoo (YHOO) with Microsoft (MSFT) and Google (GOOG) are taking place behind the scenes and a deal of some kind may be imminent.
Pressure from large shareholders has persuaded Yahoo to work out a transaction with Microsoft, or alternatively, with Google. “Something will definitely happen soon” says one of the people involved in solving Yahoo’s conundrum.
“As it now stands, Microsoft is no longer expected to meet fierce opposition from Yahoo’s top decision makers on its initial bid to buy Yahoo, albeit at a price slightly better than its initial offer of $44 billion, or $31 a share, on Jan. 31,” says one of the people acquainted with the behind-the-scenes negotiations involving Yahoo, Microsoft, and Google.
Speaking at the Bernstein Strategic Decisions Conference in New York, Ray Ozzie, Microsoft’s chief software architect, said Wednesday that the software giant would “still love to discuss possibilities with Yahoo,” but didn’t go into details of what the two companies might do together.
But if Microsoft and Yahoo can’t agree on a full buyout, Yahoo is prepared to go ahead with an alternative deal with Google that is also favored by some of the big investors: a nonexclusive outsourcing partnership on Yahoo’s search-ad business. As described by one of the people involved in the talks, Yahoo is expected to save close to $1 billion in costs and, at the same time, increase revenues from search ads.
Meanwhile, the investment firm Needham upgraded Yahoo to buy from hold, based on the belief that “significant positive change is more likely to happen at Yahoo” because of actions and statements by Icahn, Microsoft, Yahoo, and others over the past few days. “We believe a Microsoft acquisition is the most likely outcome, with an assumed 50% probability of an acquisition, either at $33, $35, or $37 per share,” with a greater weight to a compromise price, says Needham.
Sources familiar with the situation say that Microsoft is still very interested in buying Yahoo outright. They have called Yahoo an accelerator to the ad platform, and that no single company can produce all of the online content that users are interested in.
Spokespersons for Yahoo and Microsoft have declined to comment on any negotiations. Stay tuned.