14 DAY TRIAL // June 12 seems to mark the last chapter in a Microsoft and Yahoo saga debuted in 2007 with the first acquisition proposals, and which was taken public by Microsoft on February 1, 2008, with a $44.6 billion unsolicited takeover offer. Yahoo's answer had always been a firm no to a potential marriage with Microsoft, and the $31 per share proposal made little difference. The Sunnyvale Internet giant desperately fought off the Redmond company's embrace testing a pseudo-partnership with Google, and creating a severance poison pill for its employees. With failed negotiations because of price, Microsoft initially walked away from Yahoo on May 3, stating that it was no longer interested in a full acquisition scenario.
But even so, the Redmond company pushed onward with new efforts to acquire just the search division of Yahoo, but to no avail. "In the weeks since Microsoft withdrew its offer to acquire Yahoo, the two companies have continued to discuss an alternative transaction that Microsoft believes would have delivered in excess of $33 per share to the Yahoo shareholders. This partnership would ensure healthy competition in the marketplace, providing greater choice and innovation for advertisers, publishers and consumers. As stated on May 3rd and reiterated on May 18th Microsoft was not interested in rebidding for all of Yahoo. Our alternative transaction remains available for discussion," Microsoft stated.
While the software giant stated that it was still open to discussions related to the acquisition of Yahoo search, the Sunnyvale Internet company revealed that it considered all negotiations ended. In a press release, Yahoo revealed that neither a full or a partial acquisition were discussed any longer. Yahoo stressed that it aims to converge its search and advertising marketplaces, and could not have sold to Microsoft a critical aspect of its business. And to make any partnership with Microsoft impossible, the Sunnyvale company jumped in bed with Google.
Following the agreement inked with the Mountain View search giant, Yahoo will run ads from Google along its own search results but also on additional web properties in the U.S. and Canada. Yahoo CEO and co-founder Jerry Yang said that the move was designed to maximize profit. But getting Google involved in the monetization of its search business means that Microsoft is completely locked out. Yahoo search currently provides approximately $800 million per year, and the Internet giant is looking to get an incremental operating cash flow of no less than $250 million to $450 million in the first year. The initial partnership between the no. 1 and no. 2 players on the search engine market was signed for a period of four years, with Yahoo having the option to renew it for an additional six years.
"We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry. Our strategies are specifically designed to capitalize on this convergence -- and this agreement helps us move them forward in a significant way. It also represents an important next step in our open strategy, building on the progress we have already made in advancing a more open marketplace," explained Jerry Yang.