This deal sounds like it would give Microsoft the right from day one, through a call option, to pay $20B & then keep *all* search revenue generated on Yahoo properties. (In the meantime until the option was exercised Microsoft would provide search to Yahoo on a revenue split basis).
So Yahoo would with this deal commit themselves from day 1 to a situation where they could be left with no search revenue, if Microsoft decides to exercise the option. From display alone Yahoo could never survive, with or without then merging with e.g. AOL.
This deal would be a death knell for Yahoo, the precise timing of Yahoo’s future death to be decided at Microsoft’s pleasure. If Ballmer gets Yahoo search, he will be the luckiest guy on this earth. If he has time, I would recommend waiting. Google’s ad and search revenue is declining and this will drive Yahoo down further.
The Times of London reports the details of an intricate pending Microsoft-Yahoo deal, in which Microsoft would buy Yahoo’s search business for $20 billion and install Jon Miller and Ross Levinsohn to run the company. The concept sounds reasonable (Microsoft buying Yahoo search), but the price sounds ridiculous (Yahoo’s whole market cap right now is about $15 billion). And a key player in the drama, Ross Levinsohn, says the whole thing is a crock.
Microsoft declined to comment on the report. As of Friday, the market capitalisation of Yahoo in its entirety was just shy of US$16 billion. Microsoft was once willing to pay far more to get Yahoo, but a lot has changed since the early part of the year.
Since Microsoft made its last offer for Yahoo, Yahoo and Google have announced and abandoned a search deal, Yahoo’s shares have plummeted to single digits, and the company has said it would replace Jerry Yang as CEO.
The new deal, according to the Times Online, is a complex transaction that involves Microsoft supporting a new management team made up of former AOL CEO Jonathan Miller and former Fox Interactive Media president Ross Levinsohn, who are investing partners at Velocity Interactive Group.
The Times story lays out a fairly elaborate plan for a deal; it certainly would be interesting to know where they heard it. Here’s the proposal they laid out:
* The new Yahoo management team would be lead by Jonathan Miller, the former CEO at AOL, and Ross Levinsohn, a former president of Fox Interactive Media. Both men have been speculated – by Kara, among others – to be possible replacements for outgoing Yahoo CEO Jerry Yang.
* Microsoft would provide Yahoo a “$5 billion facility,” with another $5 billion to come from external investors.
* The cash would be used to buy convertible preferred shares and warrants which would give the investors 30% of the company.
* The investors would get 3 of 11 board seats.
* Microsoft would get a 10-year operating agreement to manage Yahoo search.
* Microsoft would get a two-year option to buy the search business for $20 billion. Yahoo would keep its e-mail, messaging and content operations.
* The deal would boost Yahoo’s “income,” which I presume means revenue, by as much as $2 billion a year.
* “Senior directors,” which I assume is Brit-speak for executives, “at Microsoft and Yahoo are understood to have agreed the broad terms of a deal, but there is no guarantee that it will succeed.”
* Levinsohn’s on the record response is that the Times report is “total fiction.” He said this was the first time he’d actually heard of the plan the Times laid out.
* Sources at both Microsoft and Yahoo “scoff at such a deal now taking place or that either side has been in any such discussions of late.
As much sense as it would make for Microsoft and Yahoo to come back to the table now that Jerry Yang is out of the way, yesterday’s rush of news may have been a bit premature – if not simply a case of rumor mongering.
Bloomberg says, Microsoft Corp. is backing a new management team to take control of Yahoo Inc.’s Internet search business and sign a partnership deal following its failed takeover attempt, the Sunday Times of London reported.
Microsoft will put up $5 billion to back Jonathan Miller, the former chief executive officer of AOL, and Ross Levinsohn, a former president of Fox Interactive Media, the newspaper said, without saying where it got the information.
The world’s biggest software maker is seeking ways to revive its online advertising business as the global recession stifles spending and Google Inc. wins more search users. For Sunnyvale, California-based Yahoo, which spurned Microsoft’s bids of as much as $47.5 billion this year, a deal may help shore up revenue after losing out on a partnership with Google.
Miller and Levinsohn would seek to raise an additional $5 billion from institutional investors to buy a stake of more than 30 percent in Yahoo, the Sunday Times said.
The terms would give Microsoft a 10-year operating agreement to manage Yahoo’s search business, plus a two-year option to buy it for $20 billion. Senior directors of the companies have agreed to the outline of the deal, the newspaper said, without citing anyone.
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