IT Blogwatch: Microhoo: ready... PROXY FIGHT!
In which billionaire investor Carl Icahn starts a proxy fight to restart the Microsoft/Yahoo! merger talks. [read more]
Search advertising continues to be the largest segment of online advertising and is the fuel that has propelled Google Inc.'s revenue and profits to levels that have made Microsoft green with envy. "There's got to be some search component to the deal," said Greg Sterling, an industry analyst at Sterling Market Intelligence.
What shape the tie-up might take is anyone's guess. It could be some sort of joint venture in which the companies pool assets and create a larger ad network, Sterling said. Or it could be an agreement for Yahoo to outsource part of its search advertising business to Microsoft, along the lines of what Yahoo has reportedly been negotiating for weeks with Google, he said.What's clear is that since Microsoft withdrew its offer to buy Yahoo for $33 per share on May 3, Yahoo's management and board have been bombarded with complaints from shareholders.
Last week, billionaire investor Carl Icahn turned up the heat even more when he put forth a slate of 10 candidates and announced his intention to launch a proxy fight to oust Yahoo's board at the company's shareholders meeting in July and strike an acquisition deal with Microsoft.
"Yahoo is under pressure to show shareholders some deal, probably with Google but maybe not just with Google, to give them some assurance of value on the immediate term," he said.
Of course, it's not great news for Yahoo shareholders that Microsoft is now only interested in doing a limited, narrow deal with Yahoo, said Brian Bolan, research director at Jackson Securities.
Bolan said Microsoft has evidently rethought its plan to buy all of Yahoo. "The clear indication of this is that Microsoft has looked through this soup to nuts and it has realized there's only a couple of parts of Yahoo that they really want," he said. "They don't want to duplicate services and features much in the way Yahoo has done over the years within its own properties."
One thing Microsoft does want and need is better search technology and better search monetization, so it's likely that Microsoft is eying Yahoo's assets in this specific area. But whatever form the deal takes, it will not be worth anywhere near what Microsoft had been ready to pay to acquire Yahoo, he said.