Yahoo strikes a deal!
Yahoo finally struck a deal with the competition!
But, not Microsoft. Yahoo execs announced the company has reached an advertising deal with Google. In a nutshell, Yahoo will be able to display Google ads with Yahoo search engine results. Yahoo reps hope the deal will bring in an estimated $800 million a year.
CEO Jerry Yang spoke of convergence and flexibility in a statement released just hours after what appears to be a final divergence from stiff talks with Microsoft.
Yahoo’s stock sank ten percent yesterday after investors learned of the abandoned Microsoft talks. Even after today’s deal with Google was announced, the stock is down another four percent.
Meanwhile, shares of Microsoft traded up three percent this morning.
Why has Yahoo denied Microsoft so vehemently…it certainly hasn’t helped the stock!
Tags: deal, google, Microsoft, YahooRelated Stories
POSTED IN: Corporate, Market, News, Technology
11 opinions for Yahoo strikes a deal!
Mark DallePazze
Jun 13, 2008 at 11:38 am
Despite its current price, Soleil Securities Group upgraded Yahoo stock today from a rating of Sell to Hold. Soleil claims that while business execution challenges still exist, the risk and return prospects are no longer as negative as they once were considering the new deal with Google.
On the other hand, Merrill Lynch not only maintained its neutral rating of Yahoo but lowered its price objective as well for the stock from $29 to $25 citing Yahoo’s “disappointing” outcome with Microsoft as the reason for the downgrade.
With all of the mixed opinions out there, Yahoo’s stock isn’t going to be one likely owned by people who mind a little volatility.
Joel Drosehn
Jun 13, 2008 at 11:56 am
Today’s WSJ has a good take on the Google-Yahoo ad-pact and the failed deal. In my opinion, Jerry Yang’s screwed investors out of a big pay check to save what I believe is a dying company. It’s a shame only Carl Icahn is the only one “ruffling the feathers” of a self-serving board. In the meantime, Microsoft comes away looking unsure of itself after blowing millions in advisory fees. The only winner appears to be Google who essentially neutralizes Yahoo and Microsoft but will face tough anti-trust scrutiny.
Steve Farrington
Jun 13, 2008 at 12:27 pm
I guess Car Icahn can make mistakes, too. Seems like he underestimated Microsoft in all this; perhaps thinking they’d come back if he mustered up enough proxy support. By swapping deals like this, its almost like they’d rather see Microsoft lose out than looking out for their own best interest. Terrible for the smaller shareholders of Yahoo. CNBC had a nice piece today- Yang is too worried about his own legacy and impact on the internet. Someone should tell him we’re not in 2000 anymore.
The big winner: Google (+3.5% to $572.17 early Friday afternoon). More leverage for the future in its online advertising battle with a chief rival in Microsoft.
Interesting though: If within 24 months, Yahoo is acquired by anyone OTHER than Microsoft, they have to cut Google a $250 million dollar check. Thats a nice chunk of premium any other potential suitor will have to pay up for Yahoo.
Disclosure: none
Bigslim
Jun 13, 2008 at 4:16 pm
I think that Board of Director entrenchment helped to abort the Microsoft deal. Their interests should be wealth maximization for the shareholders and not their own already fat pockets. Something needs to change….
Vince Piovoso
Jun 15, 2008 at 1:00 pm
I believe the reason the stock prices fell is because as I’m learning in finance 312 with Prof Varma, when a company is taken over the stock prices surge. Now since the Yahoo avoided the takeover its not surprising to see stock prices drop even with the pact with Google. However I do feel the pact with Google was a great move because it will be mutually beneficial to both companies.
Justin Bonifacino
Jun 15, 2008 at 7:17 pm
Very interesting outcome with the drop in yahoo stock. Just goes to show how much market influence Microsoft actually has. Maybe google will buy up yahoo now. I am very intersted in following the outcome with yahoo. This reminds me of discussions in Varmas class lectures on the results in stock prices of corporate mergers/buyouts.
Jim Ledsome
Jun 16, 2008 at 9:55 am
If the price of yahoo stock continues to fall at some point the takeover should look pretty good for yahoo. I believe that investors are selling off stock now betting the price will fall, and look to buy it back once it is really low with hopes of a deal between Microsoft and yahoo developing in the near future so they can take advantage of a short sale and get the 30% premium. Although it seems to me that Jerry Yang is holding on with a firm grip to yahoo. You would think that the estimated $800 million a year in revenue from the google ad deal would have investors jumping on the yahoo bandwagon even without talks of a takeover.
Tyrone Edwards
Jun 19, 2008 at 10:16 am
At the conclusion of the 1990s rush to acquire Internet stock only a few technical giants still stand and have proven their ability to withstand the storm of Wall Streets purchasing bandwagon. To put it in perspective Google is like Tiger Woods, Yahoo is rest of the PGA tour, and Microsoft is the USGA, whose role is to make sure that the purity of the game is withheld. Google like Tiger Woods, dominate the field and leaves all there competitors scrambling to even be half as great as they are. Ever since Tiger Woods entered the PGA tour like Google entered the Internet market, the peace keepers such as Microsoft and the USGA have been trying to increase competition and not allow one person or company control everything. I feel Microsoft finally realized that Google was unstoppable, just as the USGA has realized that Tiger Woods is unbeatable and there is not such thing as Tiger proofing a course. As Tiger becomes greater and more dominating in the future, Google will follow and not until a company comes along with a new innovative search engine, Google will continue to dominate.
Joel Drosehn
Jun 19, 2008 at 10:43 am
What a beautifully crafted analogy. Let’s just hope Google doesn’t tear it’s ACL before regulatory approval.
Joel Drosehn
Jun 20, 2008 at 10:11 pm
I’m curious to see what people (esp. Professor Silver )think about InterActive Corp (IACI) as it pertains to a possible acquisition by Microsoft after the failed deal. However Steve Ballmer’s statement that the company would not seek to acquire “non search-based assets,” was made prior to the Google-Yahoo ad pact and MSFT has already purchased TV ad technology company Navic.
With Google representing 67% of market share and Yahoo 20%, Interactive is essentially the next best thing after Microsoft-owned MSN with 4% of search-engine ownership through ask.com, a subsidiary generating $227 million in revenues. IACI also owns a host of other ad generating companies such as match.com, chemistry.com, Lendingtree, CollegeHumor, and Ticketmaster. With a MarketCap of less than 6B and Debt/Equity = 0.111 the company seems to be a fairly cheap takeover target for the time being. Thoughts?
patrick king
Jun 23, 2008 at 2:22 am
Normally a business starts out as the baby of an entrepreneur. He/she tries to do everything him or herself at first, then hires help and starts to farm things out. They make a lot of mistakes but because the product is so hot it doesn’t matter. Finally when the growth slows and the business starts to mature, they step aside and hire someone to manage the business to be profitable. Maybe they sit on the board and think entrepreneurial thoughts, but most of the time they’re a one trick pony(everyone should be so lucky). The story here goes backwards.
What does electrical engineering trained Jerry Yang know about running a multi-billion dollar business? Nothing. That’s why the stock price tanked.
This is a bandaid. It’s another revenue stream, but what does it do for the underlying business? It doesn’t increase market share. It’s not a new product. It doesn’t make their product better. It doesn’t increase growth, the engine of stock appreciation.
The idea of him stepping into the CEO role was to bring back investor confidence that that original visionary was going to make everything all right. He was expected to be like a Steve Jobs channeling the original magic onto something new. Well, one year later we haven’t seen it. Chances are he’s probably more like a Steve Wozniak.
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