Microsoft and Yahoo in talks over deal/Google, News Corp touted as potent/Computing the future for Yahoo and Microsoft/Microsoft takeover of Yahoo
Microsoft and Yahoo in talks over deal
By Richard Waters in San Francisco and James Politi in New York
Copyright The Financial Times Limited 2007
Published: May 4 2007 14:11 | Last updated: May 4 2007 23:27
Google’s runaway success in the search-engine business threatened to spark an upheaval in the online media world, as it emerged that Microsoft has made a tentative takeover approach to internet giant Yahoo.
People familiar with the situation said that the talks between the two – the latest in a series of on-again, off-again discussions in the past year – were preliminary and could lead to an alliance or other forms of cooperation. By late on Friday, one person familiar with the talks said an outright acquisition had become “unlikely”.
The talks have been prompted by an acceleration in the shift of audience and advertisers online, and Microsoft’s failure to build effective search engine and online advertising arms of its own, say analysts and industry executives.
News of the bid approach capped a week of upheaval in the media industry, as both new and old media companies tried to catch up with the shift towards digital forms of consumption. Reuters on Friday said it had received a bid approach, known to be from Canadian publisher Thomson, while Rupert Murdoch’s News Corp rocked the newspaper world this week with its unsolicited bid for Dow Jones, whose assets include the internet’s biggest paid subscription site and one of Reuters’ main newswire competitors.
Yahoo’s shares closed up nearly 10 per cent, valuing the company at $42bn. However, the shares are still about 25 per cent below their level at the start of last year. Microsoft’s shares fell 1.3 per cent.
With one of the biggest audiences on the internet, Yahoo would make a prize catch for any company looking to extend its online reach, said Imran Khan, internet analyst at JPMorgan.
For Steve Ballmer, Microsoft’s chief executive, who is estimated to have spent hundreds of millions of dollars in the past three years to try to build both a search engine and an online advertising network capable of keeping pace with Google, the deal would also mark an aggressive new front. This battle has become more intense following Google’s $3.1bn agreement to buy DoubleClick, which would launch it into the online display advertising business. But combining Microsoft and Yahoo would create huge management and cultural challenges, analysts warn.
The bid approach to Yahoo points to growing frustration at Microsoft after more than a decade of trying to become a major force on the internet.
While its MSN service claims one of the biggest audiences, it has failed to compete head on with a succession of internet leaders, from AOL to Yahoo and Google. “They’ve spent $1bn building a business that is melting like an ice cube today,” said Youssef Squali, an analyst at Jefferies & Co.
Google, News Corp touted as potential suitors
By Kevin Allison in San Francisco
Copyright The Financial Times Limited 2007
Published: May 5 2007 03:00 | Last updated: May 5 2007 03:00
Google, News Corp and Walt Disney were among the companies being touted as possible rivals to a Microsoft move for Yahoo yesterday, although some analysts warned that a bidding war was unlikely.
While some experts said Yahoo's big audience could make it a tempting target, they cautioned that few companies were in a position to make such a deal work, assuming they are interested.
"There are not a lot of other potential suitors out there," said Scott Kessler, an analyst at Standard & Poor's.
"Only a handful of entities could have the wherewithal to do this."
Yahoo's market capitalisation grew to about $44bn yesterday following an 18 per cent rise in its share price in early trading to $33.29. The climb followed a report in the New York Post that Microsoft was mulling a $50bn bid for the company.
Such a price tag would put Yahoo out of reach for all but a handful of the biggest internet or media companies.
Yet even that figure could be too low, according to Mark Mahaney, an analyst at Citigroup.
A $50bn deal would put Yahoo on a price to earnings ratio of 16 times 2008 earnings, well below that of recent deals such as Yahoo's acquisition of Right Media or Google's deal for DoubleClick. "We believe that potential strategic advantages of this deal versus Google could necessitate a higher multiple - more like [20 times 2008 earnings] or a $42 stock," Mr Mahaney said.
Any media company interested in a deal with Yahoo would be forced to confront the painful lessons of past mega-deals, such as Time Warner's disastrous $160bn merger with AOL in 2000.
"There is still the AOL/Time Warner stigma that will be daunting for anyone in the offline media world to overcome," said Youssef Squali, an analyst at Jeffries & Co. "I just don't see another suitor [emerging]," said Mr Kessler at S&P. "That's beneficial for Microsoft and not for Yahoo."
Mr Kessler said News Corp, which is stalking Dow Jones, the owner of the Wall Street Journal, was among the companies that had the scale necessary to pull off a Yahoo deal.
Computing the future for Yahoo and Microsoft
By Chris Nuttall and Richard Waters in San Francisco
Copyright The Financial Times Limited 2007
Published: May 5 2007 03:00 | Last updated: May 5 2007 03:00
Analysts yesterday struggled to find the right search query to answer why Microsoft would seek a merger with Yahoo.
Charlene Li, internet analyst with Forrester Research, summed up the scepticism of many observers in a blog note: "Why Microsoft + Yahoo makes sense - and why it won't work."
In its favour, a deal would combine two of the largest online audiences. According to comScore, Google has 528m unique users globally, compared with 527m for Microsoft and 478m for Yahoo. Stripping out the duplicated audience, that would give Microsoft/Yahoo 634m users.
Yahoo and Microsoft together would also dominate display advertising, in spite of Google's recent acquisition of the DoubleClick online display advertisement company, which may have intensified the two rivals' merger discussions.
Ms Li said the two together would also have tremendous technological strength, given the level of Microsoft investment in research and Yahoo's skills at display advertisement management. Yahoo would also bring significant internet media experience to the deal and successful "Web 2.0" acquisitions such as Flickr and Del.icio.us.
The main reason for the deal for Microsoft would be the declining importance of the Windows operating system, relegated into the background as users turned to web browsers to run applications such as e-mail.
"To survive going forward, Microsoft needs to have a robust online strategy and Live.com/MSN just doesn't cut it," Ms Li said.
But she concludes that a merger would be messy, of limited benefit to Yahoo and is not likely to happen soon. Integrating brands and management would be difficult and the distraction of a merger would not allow the new entity to gain ground on Google.
Last month's first quarter earnings revealed a mixed picture on advertising dollars being earned by the main competitors.
Google's $2.53bn were 65 per cent up on the year before, Yahoo's $980m were up only 9 per cent, while Microsoft took in an estimated $350m, up 23 per cent.
For Microsoft, this was good news, as AdCenter began to show results. AdCenter is an advertising system it built and which had led to its ending a partnership for advertising technology with Yahoo.
Asked at the Web 2.0 conference last month about whether Microsoft could still be a big online player, Jeff Weiner, head of Yahoo's network division, said: "You never ever count Microsoft out. We were strong partners and I would have loved to see that partnership stay intact as long as possible."
John Battelle, author of The Search, the story of Google's success, says Microsoft may be trying to renew that partnership now.
"Microsoft is in a strategic bind at the moment, they don't have significant leverage when it comes to online ad growth. They need scale, they don't have a way to get there without a significant acquisition," he told the Financial Times. "I can't imagine it's going to be an easy deal if it's going to be put together. I'd say there is as much chance of a significant partnership as an M&A."
Any merger would see Microsoft's MSN service being folded into Yahoo, he predicted, with Yahoo having more success in the content business.
Financial analysts also saw the strategic rationale for Microsoft. Mark Mahaney at Citigroup said while it had enjoyed limited success in internet advertising, MSN had continued to lose search query share and had underperformed the internet advertising market.
But he questioned whether any merger would gain users and advertisers from Google.
"Two simple questions," he said. "Would Microsoft owning Yahoo change consumers' clear strong preference for Google's search engine? We doubt it. Would advertisers - who have been appreciative of a third search engine in the past, though disappointed with Microsoft traction - switch ad dollars from Google? We doubt it."
Microsoft eyes takeover of Yahoo
By Daniel Pimlott and James Politi in New York
Copyright The Financial Times Limited 2007
Published: May 4 2007 14:11 | Last updated: May 4 2007 15:05
Microsoft is in early stage talks with Yahoo with a view to a possible takeover in a move that would allow the software giant to compete more effectively with Google for online advertising, according to people familiar with the matter.
Yahoo shares were up 18 per cent in early trading at $33.29, while Microsoft shares were down 1 per cent at $30.66.
Last year Yahoo turned down an offer from Microsoft to buy a stake in Yahoo’s search business. Terry Semel, chief executive of Yahoo, said discussions about the software group acquiring his company had not taken place.
News of merger talks, first reported in the New York Post, may indicate the lengths that internet companies are going to as they seek to mount a challenge in the lucrative search business dominated by Google.
Microsoft is working with Goldman Sachs on a possible deal, the newspaper said, citing an unnamed banking source. Yahoo is considered an obvious target for Microsoft, as a takeover would massively cut Google’s lead in internet search.
A deal would practically triple Microsoft’s share of the US search market to 38.4 per cent, compared with Google‘s 48.3 per cent share, according to ComScore figures.
Based on Thursday’s closing stock price, Yahoo has a market value of $38.2bn. Wall Street analysts consider the company to be worth as much as $50bn, the New York Post said.
Yahoo would also bring a leading market position in display advertising and, added to Microsoft’s existing operations, help create a massive e-mail and instant messaging user base.
But Yahoo faces problems because it has not delivered enough search advertising revenue from its army of users. Its shares fell 35 per cent in 2006.
Google has in recent months gone on a spending spree, buying YouTube, the video sharing website, for $1.6bn, and winning a bidding war against Yahoo and Microsoft for DoubleClick, paying $3.1bn for the online display advertising company.
Yahoo has also been seeking to bump up its dealmaking outside its core search advertising business. Last week it agreed to pay $680m for the 80 per cent it does not own of Right Media, which operates an online advertising exchange, in a deal aimed at hitting back against Google’s growing dominance of the online advertising services business.
Microsoft has complained that the acquisition of DoubleClick would give Google almost monopolistic powers in search advertising online, with the power to dictate terms to online publishers and service providers.
However, any Microsoft/Yahoo merger would probably attract the attention of anti-trust regulators.
The merger speculation comes shortly after the exit of Christopher Payne, who led Microsoft’s efforts to compete with Google and Yahoo in internet search.
By Richard Waters in San Francisco and James Politi in New York
Copyright The Financial Times Limited 2007
Published: May 4 2007 14:11 | Last updated: May 4 2007 23:27
Google’s runaway success in the search-engine business threatened to spark an upheaval in the online media world, as it emerged that Microsoft has made a tentative takeover approach to internet giant Yahoo.
People familiar with the situation said that the talks between the two – the latest in a series of on-again, off-again discussions in the past year – were preliminary and could lead to an alliance or other forms of cooperation. By late on Friday, one person familiar with the talks said an outright acquisition had become “unlikely”.
The talks have been prompted by an acceleration in the shift of audience and advertisers online, and Microsoft’s failure to build effective search engine and online advertising arms of its own, say analysts and industry executives.
News of the bid approach capped a week of upheaval in the media industry, as both new and old media companies tried to catch up with the shift towards digital forms of consumption. Reuters on Friday said it had received a bid approach, known to be from Canadian publisher Thomson, while Rupert Murdoch’s News Corp rocked the newspaper world this week with its unsolicited bid for Dow Jones, whose assets include the internet’s biggest paid subscription site and one of Reuters’ main newswire competitors.
Yahoo’s shares closed up nearly 10 per cent, valuing the company at $42bn. However, the shares are still about 25 per cent below their level at the start of last year. Microsoft’s shares fell 1.3 per cent.
With one of the biggest audiences on the internet, Yahoo would make a prize catch for any company looking to extend its online reach, said Imran Khan, internet analyst at JPMorgan.
For Steve Ballmer, Microsoft’s chief executive, who is estimated to have spent hundreds of millions of dollars in the past three years to try to build both a search engine and an online advertising network capable of keeping pace with Google, the deal would also mark an aggressive new front. This battle has become more intense following Google’s $3.1bn agreement to buy DoubleClick, which would launch it into the online display advertising business. But combining Microsoft and Yahoo would create huge management and cultural challenges, analysts warn.
The bid approach to Yahoo points to growing frustration at Microsoft after more than a decade of trying to become a major force on the internet.
While its MSN service claims one of the biggest audiences, it has failed to compete head on with a succession of internet leaders, from AOL to Yahoo and Google. “They’ve spent $1bn building a business that is melting like an ice cube today,” said Youssef Squali, an analyst at Jefferies & Co.
Google, News Corp touted as potential suitors
By Kevin Allison in San Francisco
Copyright The Financial Times Limited 2007
Published: May 5 2007 03:00 | Last updated: May 5 2007 03:00
Google, News Corp and Walt Disney were among the companies being touted as possible rivals to a Microsoft move for Yahoo yesterday, although some analysts warned that a bidding war was unlikely.
While some experts said Yahoo's big audience could make it a tempting target, they cautioned that few companies were in a position to make such a deal work, assuming they are interested.
"There are not a lot of other potential suitors out there," said Scott Kessler, an analyst at Standard & Poor's.
"Only a handful of entities could have the wherewithal to do this."
Yahoo's market capitalisation grew to about $44bn yesterday following an 18 per cent rise in its share price in early trading to $33.29. The climb followed a report in the New York Post that Microsoft was mulling a $50bn bid for the company.
Such a price tag would put Yahoo out of reach for all but a handful of the biggest internet or media companies.
Yet even that figure could be too low, according to Mark Mahaney, an analyst at Citigroup.
A $50bn deal would put Yahoo on a price to earnings ratio of 16 times 2008 earnings, well below that of recent deals such as Yahoo's acquisition of Right Media or Google's deal for DoubleClick. "We believe that potential strategic advantages of this deal versus Google could necessitate a higher multiple - more like [20 times 2008 earnings] or a $42 stock," Mr Mahaney said.
Any media company interested in a deal with Yahoo would be forced to confront the painful lessons of past mega-deals, such as Time Warner's disastrous $160bn merger with AOL in 2000.
"There is still the AOL/Time Warner stigma that will be daunting for anyone in the offline media world to overcome," said Youssef Squali, an analyst at Jeffries & Co. "I just don't see another suitor [emerging]," said Mr Kessler at S&P. "That's beneficial for Microsoft and not for Yahoo."
Mr Kessler said News Corp, which is stalking Dow Jones, the owner of the Wall Street Journal, was among the companies that had the scale necessary to pull off a Yahoo deal.
Computing the future for Yahoo and Microsoft
By Chris Nuttall and Richard Waters in San Francisco
Copyright The Financial Times Limited 2007
Published: May 5 2007 03:00 | Last updated: May 5 2007 03:00
Analysts yesterday struggled to find the right search query to answer why Microsoft would seek a merger with Yahoo.
Charlene Li, internet analyst with Forrester Research, summed up the scepticism of many observers in a blog note: "Why Microsoft + Yahoo makes sense - and why it won't work."
In its favour, a deal would combine two of the largest online audiences. According to comScore, Google has 528m unique users globally, compared with 527m for Microsoft and 478m for Yahoo. Stripping out the duplicated audience, that would give Microsoft/Yahoo 634m users.
Yahoo and Microsoft together would also dominate display advertising, in spite of Google's recent acquisition of the DoubleClick online display advertisement company, which may have intensified the two rivals' merger discussions.
Ms Li said the two together would also have tremendous technological strength, given the level of Microsoft investment in research and Yahoo's skills at display advertisement management. Yahoo would also bring significant internet media experience to the deal and successful "Web 2.0" acquisitions such as Flickr and Del.icio.us.
The main reason for the deal for Microsoft would be the declining importance of the Windows operating system, relegated into the background as users turned to web browsers to run applications such as e-mail.
"To survive going forward, Microsoft needs to have a robust online strategy and Live.com/MSN just doesn't cut it," Ms Li said.
But she concludes that a merger would be messy, of limited benefit to Yahoo and is not likely to happen soon. Integrating brands and management would be difficult and the distraction of a merger would not allow the new entity to gain ground on Google.
Last month's first quarter earnings revealed a mixed picture on advertising dollars being earned by the main competitors.
Google's $2.53bn were 65 per cent up on the year before, Yahoo's $980m were up only 9 per cent, while Microsoft took in an estimated $350m, up 23 per cent.
For Microsoft, this was good news, as AdCenter began to show results. AdCenter is an advertising system it built and which had led to its ending a partnership for advertising technology with Yahoo.
Asked at the Web 2.0 conference last month about whether Microsoft could still be a big online player, Jeff Weiner, head of Yahoo's network division, said: "You never ever count Microsoft out. We were strong partners and I would have loved to see that partnership stay intact as long as possible."
John Battelle, author of The Search, the story of Google's success, says Microsoft may be trying to renew that partnership now.
"Microsoft is in a strategic bind at the moment, they don't have significant leverage when it comes to online ad growth. They need scale, they don't have a way to get there without a significant acquisition," he told the Financial Times. "I can't imagine it's going to be an easy deal if it's going to be put together. I'd say there is as much chance of a significant partnership as an M&A."
Any merger would see Microsoft's MSN service being folded into Yahoo, he predicted, with Yahoo having more success in the content business.
Financial analysts also saw the strategic rationale for Microsoft. Mark Mahaney at Citigroup said while it had enjoyed limited success in internet advertising, MSN had continued to lose search query share and had underperformed the internet advertising market.
But he questioned whether any merger would gain users and advertisers from Google.
"Two simple questions," he said. "Would Microsoft owning Yahoo change consumers' clear strong preference for Google's search engine? We doubt it. Would advertisers - who have been appreciative of a third search engine in the past, though disappointed with Microsoft traction - switch ad dollars from Google? We doubt it."
Microsoft eyes takeover of Yahoo
By Daniel Pimlott and James Politi in New York
Copyright The Financial Times Limited 2007
Published: May 4 2007 14:11 | Last updated: May 4 2007 15:05
Microsoft is in early stage talks with Yahoo with a view to a possible takeover in a move that would allow the software giant to compete more effectively with Google for online advertising, according to people familiar with the matter.
Yahoo shares were up 18 per cent in early trading at $33.29, while Microsoft shares were down 1 per cent at $30.66.
Last year Yahoo turned down an offer from Microsoft to buy a stake in Yahoo’s search business. Terry Semel, chief executive of Yahoo, said discussions about the software group acquiring his company had not taken place.
News of merger talks, first reported in the New York Post, may indicate the lengths that internet companies are going to as they seek to mount a challenge in the lucrative search business dominated by Google.
Microsoft is working with Goldman Sachs on a possible deal, the newspaper said, citing an unnamed banking source. Yahoo is considered an obvious target for Microsoft, as a takeover would massively cut Google’s lead in internet search.
A deal would practically triple Microsoft’s share of the US search market to 38.4 per cent, compared with Google‘s 48.3 per cent share, according to ComScore figures.
Based on Thursday’s closing stock price, Yahoo has a market value of $38.2bn. Wall Street analysts consider the company to be worth as much as $50bn, the New York Post said.
Yahoo would also bring a leading market position in display advertising and, added to Microsoft’s existing operations, help create a massive e-mail and instant messaging user base.
But Yahoo faces problems because it has not delivered enough search advertising revenue from its army of users. Its shares fell 35 per cent in 2006.
Google has in recent months gone on a spending spree, buying YouTube, the video sharing website, for $1.6bn, and winning a bidding war against Yahoo and Microsoft for DoubleClick, paying $3.1bn for the online display advertising company.
Yahoo has also been seeking to bump up its dealmaking outside its core search advertising business. Last week it agreed to pay $680m for the 80 per cent it does not own of Right Media, which operates an online advertising exchange, in a deal aimed at hitting back against Google’s growing dominance of the online advertising services business.
Microsoft has complained that the acquisition of DoubleClick would give Google almost monopolistic powers in search advertising online, with the power to dictate terms to online publishers and service providers.
However, any Microsoft/Yahoo merger would probably attract the attention of anti-trust regulators.
The merger speculation comes shortly after the exit of Christopher Payne, who led Microsoft’s efforts to compete with Google and Yahoo in internet search.
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