Microsoft, Yahoo In Talks For Alternative Deal

SAN FRANCISCO — Microsoft Corp. is once again trying to team up with Yahoo Inc. to challenge Internet search and advertising leader Google Inc., although at this point the renewed talks haven't escalated to another attempt to take over Yahoo.

The Redmond, Wash.-based software maker disclosed the revived discussions Sunday without providing any specifics about the nature of the deal being explored except to say it involved bolstering the companies' position in the online search and advertising markets.

"Microsoft is considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo," the statement said.

Microsoft emphasized that it hasn't resurrected a $47.5 billion takeover bid that its chief executive, Steve Ballmer, withdrew after Yahoo CEO Jerry Yang _ acting on behalf of Yahoo's board _ demanded an additional $5.5 billion.

But Microsoft left open the possibility that it might dangle another buyout offer of Yahoo, depending on how the discussions progress between the two companies and their respective shareholders.

Yahoo is facing intense pressure from its shareholders to reopen sales negotiations, with activist investor Carl Icahn threatening to replace the Sunnyvale-based company's entire board unless a deal can be working out before Yahoo's July 3 annual meeting.

Although Microsoft hasn't been in touch with Icahn yet, the software maker reached out to Yahoo after the billionaire revealed his plans Thursday to lead a shareholder mutiny, according to two people familiar with the current status of the discussions. These people requested anonymity because they aren't authorized to speak on behalf of the companies.

While raising the prospect of another takeover bid, Microsoft also said the talk could just as easily go nowhere.

Yahoo had no immediate comment Sunday.

The mere acknowledgment that Microsoft and Yahoo are at least talking again will cause more analysts and investors to conclude it's only a matter of time before the two sides work out an amenable deal.

The theory that Microsoft would eventually renew its takeover attempt helped cushion the blow to Yahoo's stock since Ballmer withdrew an oral offer of $47.5 billion, or $33 per share, after Yang held out for $53 billion, or $37 per share, during a May 3 meeting in Seattle.

Yahoo shares ended last week at $27.66, down by just $1, or 3 percent, since Ballmer walked away from the discussions.

Despite the intensifying pressure from Icahn and some of its major shareholders, Yang and Yahoo Chairman Roy Bostock reiterated last week that they won't sell the company for less than the board believes.

While Yahoo's board has set a $37-per-share target, many analysts believe Microsoft could probably seal a deal by offering $34 or $35 per share.

___

AP Technology Writer Jessica Mintz reported from Seattle.

Comments

[Ariesjill]

Given the entirely opportunistic history of MS marks the antithesis of what Capitalism should be about, it took far too long for the PC market to begin to crash. Which is it. Along with Apple's slow but inexorable rise, the decline is being hastened by the insult/charade of VISTA. (And who knows, maybe their infinite litigation budget is giving out!)
The bloom also came off the Yahoo rose long ago. My take is this typical MS gobble up by whatever means necessary is going to lead to their denouement, not some resurrection. For that....there will be NO SERVICE PACK.

God bless Google. And Apple. And every single visionary MS has "killed," exploited or ingested in its ignoble history.

[dadw5boys]

SEE MICROSOFT HAD TO COME BACK YAHOO IS THE BEST DEAL!!!!!!

[msfiskvletterman]

5/18/08
7:27pm
Eugene, OR

This is not really a YAWN to me.
I still want to know what happened to my old e-mail accounts which I had with YAHOO and also HOTMAIL. Why did they disappear? Were they seized? By whom?
I needed the info in those e-mail accounts but nobody would even discuss it with me.
The content is relevant (it is evidence) to a lawsuit I filed: FISK v. LETTERMAN, et al.

[navalvet]

It might be a yawn, but a few of us may use a couple of yahoo features. If they remain useful, if Microsoft does not alter the content, I would not care who handles the advertisements. Supposing the features only worked with IE, then I would be unhappy and move elsewhere.

[Fleisch]

I don't understand why Karl Icahn is being labeled "activist investor" these days rather than "corporate raider". He's still pulling the same tricks of destroying companies by selling off their assets as long as he makes a short-term profit. Is this part of the whole Republican rebranding scheme?

[dadw5boys]

That one reason Microsoft is bach Icahn would destroy Yahoo because he does not understand how good it really is.

[KarateKid]

Y-A-W-N