14 DAY TRIAL // New details on the Microsoft-Yahoo deal have surfaced after a regulatory SEC filing, and among them there is the fact that Yahoo may receive an up-front payment of $150 million, much lower than the expected $1 to $2 billion, to cover unforeseen expenses during the transition and that Microsoft will hire at least 400 Yahoo employees of those working on search technologies.
Yahoo has said some of its 13,000 employees will be let go if the deal goes through, though a specific number wasn't filed. It now looks like some if not all of those let go will be offered jobs at Microsoft – a minimum of 400. The Redmond-based software company had 93,000 employees at the end of June, about 2,000 more compared to last year.
Another interesting detail is the fact that Yahoo has a failsafe clause allowing it to terminate the deal if the combined share of the search engine market falls below a specified percentage in the US. The deal can also be terminated “if the trailing 12-month average of the revenue per search in the United States (the "U.S. RPS") of Yahoo and Microsoft's combined queries falls below a specified percentage of Google Inc.'s ("Google") estimated RPS measured on a comparable basis.”
The most important part of the deal, the advertising partnership, was also clarified. It was known that Yahoo would handle the ad sales for premium advertisers for both search engines, while Microsoft would supply the underlying technology. During the first five years Yahoo will keep 88 percent of the ad revenue coming from its own sites after which Microsoft can end the exclusive ad sales deal in which case Yahoo will keep 93 percent of the revenue for the next five years. If, however, Yahoo chooses to remain the exclusive provider, against Microsoft's expressed wishes, its share of the revenues will fall to 83 percent. By default Yahoo’s share of the revenue will go to 90 percent.
Though not specified when the deal was announced, Microsoft will pay Yahoo $50 million each year for the first three years of the deal to cover the unexpected transition costs that aren't otherwise mentioned in other parts of the deal. It's not sure whether this will appease Yahoo's shareholders though, with many expecting a large up-front payment, as much as $2 billion, especially after comments from CEO Carol Bartz saying she would only sell the search business for “boatloads of money.”
While the initial deal only covers Yahoo Search, both for desktop and for mobiles, the company has the option to use Microsoft's mapping technologies as well, something that looks increasingly likely after Bartz saying she wasn't satisfied with Yahoo Maps. Other details are available in the full document.