Yahoo
Yahoo would add as much as $450 million a year to earnings by combining its search engine with that of Microsoft, according to Sanford C. Bernstein & Co. analyst Jeffrey Lindsay. Yahoo and Microsoft are discussing a deal, All Things Digital reported April 10, citing people familiar with the situation.
Yahoo and Microsoft are battling Google Inc. for share in the slowing Web-advertising market. Yahoo rejected Microsofts takeover offer of as much as $47.5 billion last year. Microsoft Chief Executive Officer Steve Ballmer said last month that the two companies should combine resources. Yahoo chief Carol Bartz has said that any negotiations would be private.
“Microsofts desperate,” said New York-based Lindsay, who rates Yahoo shares “market perform.” Bartz will probably be able to squeeze “top dollar” from Microsoft, he said.
Yahoo gained 89 cents to $14.36 in Nasdaq Stock Market trading at 10:42 a.m. New York time, after earlier reaching $14.49. Microsoft fell 27 cents to $19.40. Google advanced $4.78 to $377.28. U.S. markets were closed April 10 for a holiday.
Yahoo Reorganization
Bartz is reorganizing Yahoo after taking over as CEO in January. The search partnerships positive impact to Yahoos earnings before interest, taxes, depreciation and amortization would likely be $250 million to $450 million a year, Lindsay said.
Kim Rubey, a spokeswoman for Sunnyvale, California-based Yahoo, and Frank Shaw, a spokesman for Redmond, Washington-based Microsoft, declined to comment.
Ballmer said last month a search agreement “makes all the sense in the world” and that theres a “good opportunity” for a deal. The same month, Bartz said “were going to negotiate as companies negotiate — and thats privately.”
Ballmer said last month he has spoken with Bartz on the phone and that they will meet when its appropriate. The two met last week, All Things Digital reported.
Yahoo, which has declined 52 percent in the past year, tried to form a partnership with Google in 2008, only to have the Mountain View, California-based company scrap the venture after the U.S. government threatened to challenge it. Yahoo has further developed its search engine, adding a research tool in February that helps users track and take notes on their query results.
Microsoft is experimenting with new business models and ways to present Web search results, Ballmer said in an interview last month. The company, which is testing a new search engine under the name Kumo.com, wants to help customers find what theyre looking for more quickly by understanding the gist of their query better.