Bringing Out the Big Guns Yahoo Google AOL vs Microsoft News Corp/MySpace
By Azam on April 10, 2008The interest in Yahoo is getting more interesting with teams forming around different sides. Microsoft is bringing News Corp/MySpace into the fray to bid for Yahoo. The move is quite interesting since News Corp/MySpace was looking toward a combination with Yahoo to thwart Microsoft acquisition. Now News Corp is switching tactics and invading the comfortable space between the companies involved. Also, Google is indirectly linked to New Corp through an agreement guaranteeing ad revenues on MySpace in exchange for share of the profits from serving ads. AOL enters the equation as a solution of turning around the beleaguered Time Warner acquisition of AOL, and trying to find some strategic direction or off loading the headache problem altogether. Yahoo/AOL combination would in strange way unite the two in marriage under the present unique situation where both would part separate directions. Microsoft is seen as the dominate cash cow seeking to buy its way into the big ball of the Internet, and the company wants Yahoo to be the interest in attracting everyone’s attention.
The Ball of Confusion
With various scenarios being contemplated between parties, the clarity of the strategy become obscured by messy combinations and partners involved. The various roles and interest of the parties seem to diminish with larger management and integration issues. Microsoft initial offer to acquire Yahoo seemed simple although uninvited union. Yahoo made clear of its intention to avoid combination with various statement and actions to make the deal less attractive. Yahoo started to pursue strategies and combination that would allow for greater independence or simply thwart any aggressive acquisition on what is considered unfavorable terms. Yahoo held discussions with News Corp/MySpace, AOL, and Google for tie ups and combinations. Now that time is running, Yahoo has been more aggressive in courting partners in efforts to increase leverage of options to prevent Microsoft from heavy handed tactics and adverse position. The current situation is developing from a period of non movement or quite into a more aggressive shifting moves or changing of position. The question remains if the body language will lead to a real counter effort towards preventing Microsoft from acquiring Yahoo, or is Yahoo trying to garner a higher valuation from Microsoft.
Early on, Google’s CEO Eric Schmidt offered to step in and help out yahoo in effort to remain independent. Google has been fairly quite in efforts to prevent combination of arch enemy or nemesis Microsoft with Yahoo. Google recently closed on the acquisition of DoubleClick and most likely want to remain less vocal until the deal was approved by DOJ. Renewed talks between Google and Yahoo has been reported, and Yahoo is currently testing Google search on Yahoo was announced. Analyst had mentioned that Google search could prove as an attractive alternative method for Yahoo to increase revenues on web its properties. The main concern was Google/Yahoo combination would likely further increase anti completive concerns.
“We believe that a full search outsource decision could generate well over $1 billion in incremental cash flow to Yahoo,” said Citigroup analysts Mark Mahaney
Google makes more money off its search ads than Yahoo does the Citigroup analysts previously estimated Google produces 9 cents per search compared to 4 cents per search for Yahoo. Yahoo would make more money by having Google search ads on Yahoo properties and sharing a portion of ad revenues with Google.
Google recently hired star banker Frank Quattrone to advise Google on Yahoo deal.
The Latest News
Microsoft is talking to News Corp for joint bid for Yahoo. Some question the need for News Corp to enter in a joint bid and the complications that would occur in the combination of efforts. Does not make too much sense since Yahoo/MySpace combination was contemplated earlier. Microsoft is using News Corp as leverage to potential increase in its bid for Yahoo. The 3 way seems more like obfuscation than a strategy. News Corp wants to get into the party in any shape way or form.
“A joint bid could make sense if Microsoft is looking for a financing partner, which we do not believe it needs,” the UBS analysts said. “A tie-up (with Microsoft) could make sense, but we think it would increase the integration risk and may not outweigh the decrease in financial risk.” Heather Bellini UBS Analyst commented in a report.
Likely Outcome
We continue to believe a Microsoft-Yahoo deal is the most likely outcome and continue to believe that it will happen at a higher price than the initial $31 bid,” Citibank Analysts in a report
UBS analysts concurred. “We continue to believe reaching a mutual agreement with Microsoft would be the best way for Yahoo to potentially extract a higher Microsoft bid,” analysts said, expecting Microsoft’s offer to arrive between $32 and $35 per share.
Clearly, there is some posturing in the high stakes poker game while player’s playing cards close to the chest. The prize in the pot is the 44B online advertising market.
A report from ComScore showed that Google attracted 59.2 percent queries in February; Yahoo had 21.6 percent, followed by Microsoft with 9.6 percent and AOL with 4.9 percent
Categories : Media & AdsTags : AOL, Goolge, Mircosoft, MySpace, News Corp, yahoo