Yahoo-Microsoft talks resume with web search stake

26 May 2008

Microsoft has decided to resume talks with Yahoo for a possible take over move. Two weeks earlier Microsoft had withdrawn a $ 47.5 billion takeover bid for Yahoo. Now it has expressed willingness to resume discussion for a partnership that would fall short of an outright acquisition. Neither company had divulged details of the arrangement they were discussing, although it is believed to involve web search. Microsoft said on Sunday that it had not made a new offer to buy Yahoo! since withdrawing its bid on May 3. It said that they had reserved the right to reconsider that alternative depending on future developments and discussions that may take place.

The dynamics of the takeover talks changed late last week as Yahoo!'s directors grappled with a looming proxy fight with a billionaire investor, Carl Icahn. There were also reports that another search engine Google was also in the fray for taking over Yahoo!.

In February beginning Microsoft had made a public bid of $US31 a share in cash and stock, with a 62 per cent premium over Yahoo!'s share price. Later it has raised its offer to $US33 before walking away. Yahoo was asking for $US37, down from $US40. Microsoft's main goal in pursuing Yahoo! has been to expand its online advertising presence. On Sunday, Redmond, Wash.-based Microsoft said it "raised with Yahoo an alternative that would involve a transaction ... but not an acquisition." The company did not elaborate on what such a deal might entail. Yahoo has also opened its mind for pursuing any transaction which is in the best interest of our stockholders" and that it has confirmed Microsoft is not again trying to gain control of the whole company. According to The Wall Street Journal, the agreement Microsoft and Yahoo! are discussing involves Yahoo! carrying search advertisements from Microsoft. That might be a way for Microsoft to scuttle talks between Yahoo! and Google for a similar partnership, the newspaper said.