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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times reporter Sharon Chan.

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March 19, 2009 1:02 PM

Ballmer reiterates interest in Yahoo, says tide turned on Apple, would relish IBM-Sun deal

Posted by Benjamin J. Romano

Microsoft CEO Steve Ballmer was in New York for an on-stage interview with BusinessWeek editor-in-chief Stephen Alder as part of the McGraw-Hill Media Summit today. He made some interesting comments on Yahoo, Apple, a potential Sun-IBM tie up. But there was no fundamental change in his position. That didn't stop the Web-cast interview from making headlines, which may have buoyed Yahoo's shares (Microsoft was up a bit, too) against a day of measured decline wrapping up on Wall Street. At the close Microsoft: Up 18 cents, 1 percent, to $17.14. Yahoo: Up 32 cents, 2.4 percent, to $13.74. Nasdaq: Down 0.52 percent. Dow: Down 1.2 percent.

Here's a summary of his comments:

Continue reading this post ...


Comments | Category: Apple , Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

February 24, 2009 6:15 AM

Microsoft Strategic Update: Ballmer tells Wall Street more dramatic cost cutting would be 'imprudent'

Posted by Benjamin J. Romano

With Microsoft's Redmond campus largely emptied out for the winter holidays, CEO Steve Ballmer crunched the numbers on the proper level of spending for his company against the current economic climate, which he has repeatedly referred to as a "reset" rather than just a recession. Ballmer said his own estimates for the weakness and duration of the downturn tend to be more severe than those of other business leaders he meets.

With that in mind, he settled on $27.5 billion of operating expenses -- a level the company aims to hold relatively steady through the current fiscal year, which ends June 30, and during its 2010 fiscal year. Ballmer made clear to financial analysts meeting in New York this morning for the company's annual strategic update that cutting back even more significantly -- say to $20 billion -- would be "imprudent."

"I think this is right," Ballmer said.

That should give some comfort to those wondering if the modest layoffs Microsoft announced last month were the beginning of a more significant reduction. Wall Street analysts and investors are pressuring companies in every industry to continue cutting costs as sales and profits slow dramatically.

The strategic update call just came to an end. Ballmer gave a detailed look at seven major business areas for the company. Check back here later this morning for more details.

Update, 7:50 a.m.: As he told Congressional Democrats earlier this month, Ballmer said Microsoft's corporate strategists have been evaluating past downturns -- particularly those driven by "deleveraging." The team read company annual reports from 1927 to 1938 to determine who did a good job managing through the Great Depression. "RCA, God rest them in peace, became our role model," Ballmer said. The company was able to dominate the television business because it continued to invest during bad times, he said.

Then he broke down how Microsoft plans to invest.

Continue reading this post ...


Comments | Category: Advertising , Apple , Enterprise , Financial , Games & entertainment , Google , Microsoft layoffs , Mobile , Office , Online services , Open source , Search , Server and tools , Steve Ballmer , Strategy , Tech Economy , Windows , Windows 7 , Windows Azure , Windows Mobile , Xbox 360 , Yahoo acquisition , Zune |Permalink | Digg Digg | Newsvine Newsvine

January 28, 2009 10:38 AM

Bartz on selling parts of Yahoo: 'This is not a company that needs to be pulled apart and left for the chickens'

Posted by Benjamin J. Romano

Carol Bartz, Yahoo's new CEO, was peppered Tuesday with questions about a potential search deal with Microsoft or another go at partnering with AOL-Time Warner. Here are some of her choice exchanges with financial analysts during a conference call after the Internet company reported a loss in the fourth quarter.

Continue reading this post ...


Comments | Category: Personalities , Search , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

January 26, 2009 11:22 AM

Reviewing a year of the Microsoft-Yahoo saga

Posted by Benjamin J. Romano

forblog_msftyahoo.jpg

So much has changed in a year, but one thing remains the same. Steve Ballmer, CEO of Microsoft, still covets Yahoo's share of the Internet search and advertising market. While an outright acquisition is off the table -- and has been since last spring -- Ballmer remains interested in a search partnership, as his company has been unable to gain ground on market-leader Google. In fact, since Microsoft proposed its acquisition nearly a year ago, it has lost more than a point of Internet search-market share while Google has gained five points. Last week, as Microsoft announced its first companywide layoffs, Ballmer said the company would continue to hire in strategically important areas such as Internet search. "I think I've been quite public about the fact that I think there are advantages for consumers, advertisers, Microsoft and Yahoo through a search partnership; and we'd like to do one," he said. And with new leadership at Yahoo in the person of Carol Bartz, whom Ballmer said he knows well and was "glad to see at the helm of Yahoo," who knows what the next year will hold? "If it's appropriate, I'm sure we'll have the right discussion," Ballmer said.

We plotted some key moments in the Microsoft-Yahoo acquisition dance that captured an enormous amount of attention in the financial and technology worlds during the last 12 months. Microsoft's initial proposal to buy Yahoo came to light early on Feb. 1, 2008. (Note: This image is obviously a bit fuzzy. Here's a full-sizedPDF of the chart.)

Comments | Category: Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

January 16, 2009 4:17 PM

Search market largely unchanged in December as Yahoo, Microsoft execs meet

Posted by Benjamin J. Romano

ComScore's U.S. Internet search share report shows the major players had were little changed in December. Google is still the leader, far and away, with 63.5 percent of the market, unchanged from November. Yahoo, according to comScore, gained a smidge to 20.5 percent. Microsoft continued along in third place with 8.3 percent.

Meanwhile, The New York Times and Valleywag report on a meeting in New York City earlier this week between Microsoft CEO Steve Ballmer and Yahoo Chairman Roy Bostock. This follows an informal discussion between Ballmer and Yahoo's new CEO, Carol Bartz, at some point since she was picked for the post by the Yahoo board.

These high-level contacts have of course fueled speculation that Yahoo and Microsoft are working toward some sort of search deal.

Comments | Category: Search , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

January 13, 2009 10:16 AM

WSJ: Yahoo has picked its new CEO, Carol Bartz

Posted by Benjamin J. Romano


AUTODESK

Carol Bartz, reportedly the next Yahoo CEO.

The Wall Street Journal reports that Yahoo, after a two-month search, has a new chief executive. Jerry Yang's replacement will be Carol Bartz, former CEO of Autodesk, the paper reports, citing people familiar with the matter.

[Update, 2:55 p.m.: It's official.]

The installation of a new CEO at Yahoo sets the stage for a possible resumption of deal talks between Microsoft and Yahoo. Last week, Microsoft CEO Steve Ballmer told the Financial Times,

"We now have someone in place running our online business [Qi Lu, a former Yahoo search exec who started at Microsoft last week], and Yahoo's out looking for a CEO.


"If a search deal is to be made, it's probably to be made in the interim period for new leaders in both places."

Comments | Category: Coming and going , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

January 8, 2009 6:53 PM

Ballmer addresses Yahoo search deal questions in CES interviews

Posted by Benjamin J. Romano

Nearly a full year has passed since Microsoft opened its campaign to acquire Yahoo, and later, just its Internet search business. In interviews published today, Microsoft CEO Steve Ballmer gave his latest thinking on the matter appears to has changed little in months: He's interested in buying just Yahoo's search business.

Continue reading this post ...


Comments | Category: Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

January 7, 2009 12:13 PM

Report: Silicon Valley execs, bankers crafting proposal to buy Yahoo, sell search to Microsoft

Posted by Benjamin J. Romano

If this comes to pass, it's a great scoop for Tech Crunch: The Web site is reporting on a complex proposal by "well known Silicon Valley executives and top investment bankers" to seek financing from Microsoft for a purchase of Yahoo. They would immediately sell Yahoo's search business, which Microsoft has coveted publicly for nearly a year now, to Microsoft and install a new executive team to operate Yahoo.

[Update, 2:09 p.m.: A Microsoft spokesman said the company is not commenting on the report.]

Continue reading this post ...


Comments | Category: Search , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

December 4, 2008 1:33 PM

Qi Lu, former Yahoo search exec, appointed president of Microsoft's Online Services business

Posted by Benjamin J. Romano


MICROSOFT

Meet the new boss: Former Yahoo Qi Lu to lead Microsoft Online Services Group.

Just announced: "Microsoft Corp. today announced that Dr. Qi Lu will join the company as president of the Online Services Group. Dr. Lu will lead Microsoft's efforts in search and online advertising and all the company's online information and communications services. Dr. Lu will report to Microsoft Chief Executive Officer Steve Ballmer."

Brian McAndrews, senior vice president of the Microsoft Advertiser and Publisher Solutions group, is leaving the company, Microsoft said in a statement.

Updates throughout at 1:59 p.m.

Continue reading this post ...


Comments | Category: Coming and going , Online services , Search , Steve Ballmer , Strategy , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

December 4, 2008 10:19 AM

Former Yahoo search star to top job at Microsoft?

Posted by Benjamin J. Romano

Is Microsoft acquiring Yahoo's search business one person at a time? It looks that way, if Kara Swisher is right about Qi Lu taking the top online spot at Microsoft. Lu spent 10 years at Yahoo rising to senior vice president of engineering for for search and search marketing.

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Comments | Category: Coming and going , Search , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

December 2, 2008 11:21 AM

WSJ: Jonathan Miller courting investors for possible Yahoo buyout

Posted by Benjamin J. Romano

Jonathan Miller, one of the two would-be leaders named in the weekend's widely discredited Yahoo story from The Sunday Times of London, is again in the headlines. This time, the former AOL CEO is said to be drumming up investors to purchase all or part of Yahoo, according to unnamed sources quoted by The Wall Street Journal.

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Comments | Category: Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

November 30, 2008 6:01 PM

More sources questioning Sunday Times story on complex Microsoft-Yahoo deal

Posted by Benjamin J. Romano

More sources are raising doubts about a Sunday Times of London report on a complex deal being negotiated between Microsoft, Yahoo and other investors. Kara Swisher is quoting Ross Levinsohn saying the report is "total fiction" -- which is essentially what he told VentureBeat yesterday.

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Comments | Category: Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

November 29, 2008 9:04 PM

Sunday Times report has Microsoft discussing deal to buy Yahoo search for way too much

Posted by Benjamin J. Romano

A report in The Sunday Times (of London) late today outlines a complex potential deal between Microsoft, a pair of digital media heavyweights and Yahoo, but several elements in the story don't add up and already one of the principals has denied knowledge of such a deal.

Continue reading this post ...


Comments | Category: Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

November 26, 2008 9:44 AM

Microsoft Internet search share stable in October; Fortune scrutinizes online business

Posted by Benjamin J. Romano

Microsoft held stead in October with 8.5 percent of the U.S. Internet search market, according to figures released today by comScore. Its rivals, Google and Yahoo, both gained slightly from their September positions.

Meanwhile, Fortune has taken a stab at answering the question, "Why can't Microsoft make money online?"

Continue reading this post ...


Comments | Category: Advertising , Google , Online services , Search , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

November 21, 2008 11:19 AM

One puppet's interpretation of Ballmer's message to Yahoo (language advisory)

Posted by Benjamin J. Romano

During Microsoft's shareholder meeting in Bellevue on Wednesday, there was an old guy in the front row sleeping as CEO Steve Ballmer repeated the same message he's given on Yahoo several times in the past few months: "acquisition discussions are finished." But a search partnership remains a possibility.

Ballmer puppet.JPGMaybe if his delivery, instead of being calm and measured, was more along the lines of this glove-puppet Ballmer's "final statement on purchasing Yahoo," posted by Loren Feldman at 1938enterprise.com, the old guy would have perked up.


Note: You might want to turn down the volume on your computer before viewing this, or avoid it entirely if you're sensitive to f-bombs, mf-bombs and other blue language. Enjoy.

How much more do you think Yahoo's stock would have fallen if glove-puppet Ballmer gave the statement?

Comments | Category: Miscellaneous , Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

November 19, 2008 8:40 AM

Updated: Ballmer: Microsoft "done with all acquisition discussions with Yahoo," but still open to search partnership

Posted by Benjamin J. Romano

Updated with full quote, additional information: Microsoft CEO Steve Ballmer restated his position on Yahoo in response to a question from a shareholder at the company's annual meeting in Bellevue this morning.

"Can you tell us what's happening with Yahoo, or not?" asked a woman who did not identify herself.

Ballmer replied: "Yeah, let me be as clear as I think I've tried to be publicly. We are done with all acquisition discussions with Yahoo. I've said that a bunch of times. Somehow, some people got confused nonetheless. We did our best. We thought we had something that made sense. If it made sense to them, we've moved on. With that said, I've also been clear that if they were interested we would still be--- I think an interesting possibility to look into search collaboration with Yahoo, as we had proposed last summer, but there's no active discussion on that front, but we'd be very open to it. But acquisition discussions are finished."

Continue reading this post ...


Comments | Category: Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

November 17, 2008 7:25 PM

Job opening: CEO of large Internet company

Posted by Benjamin J. Romano

You've likely already heard this, but I wanted to make mention of it here, too: Yahoo CEO Jerry Yang announced that he's stepping down today.

Continue reading this post ...


Comments | Category: Coming and going , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

November 6, 2008 3:58 PM

Microsoft still not interested in acquiring Yahoo

Posted by Benjamin J. Romano

Despite Yahoo CEO Jerry Yang's assertion that buying Yahoo is "the best thing for Microsoft to do," Microsoft doesn't see it that way.

A company spokesman told Bloomberg News today that there are no talks between the companies and that the official statement it issued on the matter in mid-October remains the official position. To review: "Microsoft has no interest in acquiring Yahoo!; there are no discussions between the companies."

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Comments | Category: Search , Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

October 16, 2008 1:28 PM

Ballmer's full Yahoo quote, in context

Posted by Benjamin J. Romano

Reports on Microsoft CEO Steve Ballmer's comments on Yahoo earlier today included snippets (some not entirely accurate) of his comments. I just watched a Webcast of the interview and took down the full question and answer, which is a bit more revealing.

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Comments | Category: Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

October 16, 2008 9:43 AM

Microsoft's Ballmer revives Yahoo deal possibility

Posted by Benjamin J. Romano

Bloomberg and others are reporting that Microsoft CEO Steve Ballmer said this morning a deal between his company and Yahoo may still make sense economically for shareholders and that "[p]erhaps there will be continuing opportunities to" talk about a search partnership in the future.

(Update, 10:38 a.m.: Microsoft just poured cold water on this one, issuing the following statement: "Our position hasn't changed. Microsoft has no interest in acquiring Yahoo!; there are no discussions between the companies.")

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Comments | Category: Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

October 13, 2008 6:22 AM

Microsoft news roundup: Analysts see lingering IT spending dip; More YHOO-MSFT chatter; Silverlight announcement on tap

Posted by Benjamin J. Romano

Markets are rallying this morning (major indexes up around 4 percent in early trading) in response to efforts by governments around the world to guarantee lending and calm last week's financial turmoil. But even if this is the beginning of the end of the beginning, enterprise software companies including Microsoft are in for a painful hangover, according to analysts at Friedman Billings Ramsey.

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Comments | Category: Financial , Strategy , Tech Economy , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

October 10, 2008 9:42 AM

Yahoo shareholder wants Microsoft to buy at $22 a share; is RIM on the shopping list, too?

Posted by Benjamin J. Romano

Mithras Capital, which owns 0.14 percent of Yahoo, has floated a proposal for Microsoft to buy the floundering Internet giant for $22 a share, according to reports from Reuters and Bloomberg. That would be a 74 percent premium to Yahoo's Thursday closing price of $12.65, but still significantly below the $31-a-share stock and cash offer Microsoft made for the company Feb. 1.

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Comments | Category: Financial , Mobile , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

October 8, 2008 9:37 AM

Analyst cuts Yahoo price target, raises specter of another Microsoft bid

Posted by Benjamin J. Romano

American Technology Review analyst Rob Sanderson issued a research note today cutting his price target on Yahoo from $33 a share to $22 a share. Sanderson said that combined with Microsoft's continued struggles in its online services business could lead the software giant to bid for Yahoo again. Reuters reports that Bank of America analysts also cut their target for Yahoo shares from $24 to $16.

Yahoo shares were down 5.5 percent, to the $13.70s in mid-day trading on the Nasdaq.

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Comments | Category: Financial , Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

August 14, 2008 3:55 PM

Yahoo picks local wireless veteran John Chapple, Frank Biondi Jr. for board

Posted by Benjamin J. Romano


KEN LAMBERT/THE SEATTLE TIMES

Chapple in 2005.

Yahoo tapped local wireless industry mover John Chapple to fill one of two new seats on its board of directors, culminating a deal the Internet company negotiated with Carl Icahn to avoid a proxy fight. The second new board seat goes to Frank Biondi Jr., a media mogul.

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Comments | Category: Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

August 1, 2008 2:09 PM

Yahoo directors re-elected, but shareholders show displeasure

Posted by Benjamin J. Romano

After its shareholder meeting today, Yahoo released results of voting for its board of directors. All the director candidates were running unopposed, but the number of votes withheld was viewed as a measure of shareholders' displeasure.

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Comments | Category: Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

August 1, 2008 12:06 PM

Yawn-hoo: Few fireworks at Yahoo shareholder meeting

Posted by Benjamin J. Romano

The Yahoo shareholders who spoke at the company's meeting in San Jose today were not particularly interested in raking the company's board of directors over the coals for its handling of Microsoft's acquisition offer. In fact, several who spoke praised the board and were glad that it held off Microsoft. In the quote of the day, one man, who said he owns 1,200 shares, along with his wife, described Microsoft as "a corporation-destroying, over-the-hill, green tentacled octopus from Redmond." Zing.

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Comments | Category: Yahoo , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

July 24, 2008 3:30 PM

FAM: CFO Liddell says chance of full acquisition of Yahoo "essentially negligible"

Posted by Benjamin J. Romano

Microsoft Chief Financial Officer Chris Liddell just took the financial analysts here through another re-hash of Yahoo pursuit. He said the value of Yahoo has eroded since Microsoft made its acquisition offer in January. Going forward, he said, the chances of Microsoft buying all of Yahoo are so small as to be "essentially negligible." A search-only transaction is still a possibility.

Comments | Category: FAM 2008 , Financial , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

July 24, 2008 10:01 AM

FAM: Ballmer on Yahoo

Posted by Benjamin J. Romano

Microsoft CEO Steve Ballmer is explaining his view of the Internet search market and the company's pursuit of Yahoo, which has been the biggest story in the tech world for the first half of the year.

Ballmer repeated his mantra: Yahoo was a tactic to quickly build the scale necessary to compete in search and search advertising, but it wasn't the company's strategy.

The company was ready to spend "$40 whatever blah-blah billion for Yahoo," he said. Because it's no longer doing that, the company has more flexibility to reinvent the search and advertising model, Ballmer said.

He said there's "nothing under discussion between the two of us," but did not rule out the possibility of future discussions.

One big reason Microsoft backed off its proposal to buy the whole company was the delay in moving a transaction forward, which would have pushed the regulatory review process into the next U.S. administration. Ballmer said the company had a tight time line and wanted to go through regulatory review of a potential acquisition with one administration, not two.

Comments | Category: FAM 2008 , Steve Ballmer , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

July 15, 2008 7:44 AM

Morning news roundup

Posted by Benjamin J. Romano

LOS ANGELES -- I'll be covering the E3 press conferences of Nintendo and Sony - Microsoft's competitors in the game console business - beginning this morning at 9 and 11:30 a.m., respectively. Meanwhile, here's today's story summarizing Microsoft's games and entertainment announcements from Monday. You can see all of my posts from E3 here.

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Comments | Category: E3 2008 , Legal issues , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

July 14, 2008 11:55 AM

Microsoft fires back, disputing Yahoo's account of weekend offer

Posted by Benjamin J. Romano

Yahoo had the stage itself on Sunday to tell the story of Microsoft's latest proposal, which it rejected. But Microsoft fired back this morning with its own account of the last-ditch deal effort that went down starting Thursday.

Update, 12:33 p.m.: Carl Icahn is also out with another letter to Yahoo shareholders disputing Yahoo's account.

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Comments | Category: Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

July 11, 2008 9:28 AM

Reports: Bad blood could stymie Yahoo-Microsoft deal

Posted by Benjamin J. Romano

The chatter around Yahoo-Microsoft coming out of the Allen & Co. bigwig shindig in Sun Valley, Idaho, this week is increasingly acrimonious and negative toward any deal.

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July 7, 2008 1:22 PM

Lots for Microsoft, Yahoo to talk about at upcoming elite Sun Valley business retreat

Posted by Benjamin J. Romano


DOUGLAS C. PIZAC/AP

Yahoo's Jerry Yang and Google's Sergey Brin at the 2004 Allen & Co. Sun Valley Conference.

With Yahoo, Microsoft and Carl Icahn waging a public campaign to win shareholder hearts and minds (and, most important, votes), a few more interesting reports surfaced this afternoon: One major Yahoo shareholder is said to be leaning toward Icahn's slate of director candidates. Meanwhile, any potential Yahoo-AOL deal would be on hold until after Aug. 1.

All of this as the titans of the online and media worlds head toward Sun Valley, Idaho, for the annual Allen & Co. deal-making retreat.

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Comments | Category: Carl Icahn , Microsoft , Tech Economy , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

July 7, 2008 9:51 AM

Yahoo says it's ready to deal with Microsoft now

Posted by Benjamin J. Romano

Yahoo, responding to the coordinated communications barrage from Microsoft and Carl Icahn earlier this morning, said in a statement in "continues to stand ready" to deal.

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July 7, 2008 6:30 AM

Microsoft would pursue Yahoo acquisition if new board were elected

Posted by Benjamin J. Romano

Microsoft CEO Steve Ballmer and billionaire activist investor Carl Icahn have spoken frequently in the last week about the prospects of a deal to buy some or all of Yahoo should Icahn's slate of director candidates win control of the company at the Aug. 1 Yahoo shareholder meeting. Icahn issued another open letter to shareholders this morning, which Microsoft answered with a statement of its own.

"While of course there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo!'s shareholder meeting if a new board is elected," Microsoft said.

Such a transaction could include the purchase of just Yahoo's Internet search business -- a prospect Microsoft has had on the table since at least May 18 -- or a full acquisition. Since Jan. 31, Microsoft has been trying to buy Yahoo to strengthen its position against Internet search and advertising leader Google.

Update: Both Icahn's letter and Microsoft's statement describe the frustration Ballmer has felt toward Yahoo and its management. From the Microsoft statement:

"Despite working since January 31 of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and Board of Directors at Yahoo!. We have concluded that we cannot reach an agreement with them."

Icahn provided more detail, based on his discussions with Ballmer and other Microsoft execs, including Kevin Johnson:

"Steve made it abundantly clear that, due to his experiences with Yahoo! during the past several months, he cannot negotiate any transaction with the current board. His logic is simple. If and when a transaction was consummated, Microsoft would be guaranteeing a great deal of capital at closing. However, a transaction could take at least nine months and perhaps longer to obtain regulatory clearance in the U.S., Europe, and elsewhere. During that period, if the current board and management team of Yahoo! mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost. ... Microsoft perceives this risk may be quite high with the current board and management in place."

While being careful to note that he does not speak for Yahoo (yet) and that no transaction can be guaranteed, Icahn is clearly turning up the volume on his campaign to oust Yahoo's board by dangling a Microsoft deal in front of investors. He began his attack on Yahoo's current board in mid-May, about two weeks after Microsoft withdrew its first proposal to buy Yahoo.

"While there can be no assurance of a future transaction, as many of you know, I have negotiated successfully a large number of transactions over the past years. If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase 'Search' with large guarantees."

Microsoft offered Yahoo $1 billion for its search business in a deal that would have included an $8 billion investment in the company and a long-term advertising partnership, including "a three-year guarantee of higher monetization than Yahoo!'s Panama paid search system currently provides," according to a letter Johnson issued June 18 explaining the search proposal. This was after Yahoo and Google announced a search-advertising pact of their own.

Icahn noted that his recent conversations with Ballmer did not include price or specifics on whether a search buy or a full acquisition makes the most sense. He also expressed his intent to "expeditiously" replace Jerry Yang as CEO of Yahoo on election of a new board.

Other coverage of note:

-- Yahoo reportedly talked over the holiday weekend with Time Warner about a deal with AOL, according to The Times Online. The story says Yang is scrambling to secure an alternative deal for Yahoo to present at the company's shareholder meeting.

-- More pressing even than the shareholder meeting is Yahoo's second quarter report on July 22, after the market closes, says Kara Swisher. "It is highly unlikely Yahoo leadership will blow the quarter. Or -- more to the point -- they simply cannot, especially given all the unending turmoil that has engulfed the company," Swisher wrote. "And, in fact, top execs have been working to avoid that possibility, sources inside the company said, including using well-known tricks of the trade, such as striking more short-term display deals at lower CPMs."

Update: Shortly after the opening of trading, Microsoft's shares were up about 28 cents, or just over 1 percent, to $26.26. Yahoo's had gained $2.24, more than 10 percent, to $23.59.

Update: See this post for Yahoo's response.

Comments | Category: Carl Icahn , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

July 2, 2008 9:21 AM

WSJ: In secret meeting, Microsoft told Yahoo execs to look for the woman with the red umbrella

Posted by Benjamin J. Romano

The Wall Street Journal is out today with a major rehash of the Microsoft-Yahoo acquisition saga that includes some great corporate cloak-and-dagger details from the last five months. The news, however, is that Microsoft has been making another round of calls to the usual suspects -- Time Warner's AOL unit and News Corp. -- to find partners for a Yahoo bust-up deal.

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June 4, 2008 6:16 PM

Microsoft negotiating with Yahoo on price of search business, Reuters reports, conclusion expected in 'next week or so'

Posted by Benjamin J. Romano

Reuters, quoting anonymous sources, reports that negotiations between Microsoft and Yahoo on an alternative transaction are progressing and "are likely to conclude in the 'next week or so.' "

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May 27, 2008 3:23 PM

Gates to tease with Windows 7 features tonight

Posted by Benjamin J. Romano

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Comments | Category: Bill Gates , Google , Personalities , Steve Ballmer , Tech Economy , Windows 7 , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

May 15, 2008 10:29 AM

Microsoft quietly watching as Ichan raids Yahoo

Posted by Benjamin J. Romano

The billionaire financier Carl Ichan today disclosed his 4.4 percent stake in Yahoo and his plans to oust the company's directors in a bid to take control and sell Yahoo to Microsoft. In his letter to Yahoo, sent 12 days after Microsoft dropped its bid to acquire the company, Ichan writes that Yahoo's board "acted irrationally and lost the faith of shareholders and Microsoft."

Microsoft, meanwhile, is quietly watching the scenario unfold.

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May 6, 2008 10:45 AM

With proxy fight threat level lowered, Yahoo schedules shareholder meeting

Posted by Benjamin J. Romano

Yahoo announced the date of its shareholder meeting yesterday. It will be held on Thursday, July 3. Before Microsoft CEO Steve Ballmer withdrew his bid to buy the company and took his finger off the hostile-takeover trigger, the announcement of Yahoo's meeting date was a much anticipated moment in the acquisition story.

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May 5, 2008 2:18 PM

Buffett and Gates talk business

Posted by Benjamin J. Romano

A day after Berkshire Hathaway's shareholder meeting, billionaire buddies Warren Buffett, Berkshire's chairman, and Bill Gates, a Berkshire director, were interviewed today on Fox Business Channel. Here's a short story summarizing the conversation, and here are some interesting excerpts from a transcript provided by the Fox Business Network.

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Comments | Category: Bill Gates , Entrepreneurs & VCs , Personalities , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

May 5, 2008 1:58 PM

Yahoo shares finish down 15 percent, recovering some early losses

Posted by Benjamin J. Romano

When the trading session ended today, Yahoo's stock was down 15 percent -- a less severe loss than some analysts were expecting. Shares recovered during the day and finished at $24.37, down $4.30 on the first trading day since Microsoft withdrew its acquisition proposal.

Microsoft, meanwhile, made gains early in the day, but finished in the red, down 16 cents to $29.08. Several analysts chimed in on the deal this morning. See this post for details.

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May 5, 2008 6:08 AM

Yahoo shares begin 20 percent lower; some analysts suspect Microsoft come-back bid

Posted by Benjamin J. Romano

In heavy pre-market trading, Yahoo shares fell, as expected, about 20 percent to $23.04 on heavy volume as investors sold off the stock in response to Microsoft withdrawing its acquisition offer.

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May 4, 2008 1:14 PM

Microsoft drops Yahoo bid: Reaction from around the Web

Posted by Benjamin J. Romano

There's no shortage of punditry and analysis on Microsoft's decision late Saturday to walk away from its proposed purchase of Yahoo. Here's some of the most insightful commentary I've seen so far.

Continue reading this post ...


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May 4, 2008 1:08 PM

Microsoft drops Yahoo bid: Ballmer explains next steps to employees

Posted by Benjamin J. Romano

Microsoft CEO Steve Ballmer on Saturday night explained his decision to walk away from the Yahoo acquisition in an email to employees. He also outlined the company's strategy in online services and advertising going forward. The email was sent at 5:18 last night, shortly after Microsoft made its decision public.

Continue reading this post ...


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May 3, 2008 6:56 PM

Microsoft-Yahoo: It's over. What do you think?

Posted by Benjamin J. Romano

The announcement this afternoon that Microsoft is dropping its proposal to buy Yahoo looks to be accompanied by no ifs, ands or buts. In a letter to Yahoo CEO Jerry Yang, Microsoft CEO Steve Ballmer indicated no plans to launch a hostile takeover, and a company adviser said bluntly, "The offer is off the table."

See this post on Brier Dudley's blog for the full text of the letter. Here's my story on the news.

So what do you think? Was this a good move or a bad move? How is Microsoft going to catch Google without Yahoo? How annoyed are you that after three months of anxious waiting we've got bupkis?

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May 2, 2008 1:53 PM

Microsoft, Yahoo negotiating, according to anonymous reports

Posted by Benjamin J. Romano

We have not been able to independently verify reports in The Wall Street Journal and New York Times this afternoon that Yahoo and Microsoft are back at the negotiating table.

Continue reading this post ...


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May 2, 2008 9:57 AM

Biz press flummoxed, reporting on its own reporting, as MSFT-YHOO dance marathon continues

Posted by Benjamin J. Romano

Update, 12:06 p.m.: Andrew Ross Sorkin of The New York Times has a source confirming that merger talks between Microsoft and Yahoo are ongoing.

Update, 1:56 p.m.: Yahoo's stock price rose even more, closing at $28.67, up $1.86, or nearly 7 percent. Microsoft was down 16 cents, closing at $29.24.


"Ah, what to say about Yahoo and Microsoft?" David Faber, CNBC anchor and co-producer said on his segment this morning, summing up what many in the business press are feeling about now. "I feel like I need to say something about Yahoo and Microsoft given how much I've already said about Yahoo and Microsoft, so here goes."

Continue reading this post ...


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May 1, 2008 11:13 AM

Microsoft's Bellevue footprint getting bigger still; excerpts from today's employee meeting

Posted by Benjamin J. Romano

The company is confirming today that it plans to lease the 26-story City Center Plaza, under construction at Northeast Sixth Street and 110th Avenue Northeast in downtown Bellevue. That would be on top of more than 1.3 million square feet of office space it nabbed last spring, and its swanky Lincoln Square digs.

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April 30, 2008 1:47 PM

WSJ: Microsoft board meeting now on Yahoo, companies still separated by price

Posted by Benjamin J. Romano

The Wall Street Journal's anonymous sources say Microsoft's board of directors is meeting now to weigh its next step in the Yahoo takeover drama. An announcement is expected at the conclusion of the meeting. Someone familiar with the matter told us earlier today that the situation is still undetermined.

Continue reading this post ...


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April 28, 2008 12:21 PM

How do Microsoft employees view the Yahoo acquisition?

Posted by Benjamin J. Romano

Mary Jo Foley explores how Microsoft employee morale has suffered since the company began pursuing its acquisition of Yahoo. She says there's a "real and prevailing sentiment among many in the Microsoft ranks" that the company should walk from the deal, no matter the price.

I've heard from a few at the company on this subject, and their thinking tends to follow these lines. But I'd love to hear from more employees.

Continue reading this post ...


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April 28, 2008 8:47 AM

No Yahoo announcement this morning

Posted by Benjamin J. Romano

Microsoft General Counsel Brad Smith said he had no news on Yahoo this morning when I spoke with him on the sidelines of a company conference for law enforcement officials.

Continue reading this post ...


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April 24, 2008 4:09 PM

Microsoft to Yahoo: Progress toward a deal this weekend or we go hostile or walk

Posted by Benjamin J. Romano

Microsoft CFO Chris Liddell addressed the biggest outstanding issue facing his company during its third-quarter earnings conference call this afternoon: the bid to acquire Yahoo. He gave one of the strongest indications yet that Microsoft is considering abandoning the deal.

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April 24, 2008 11:05 AM

Ballmer not boosting Yahoo bid, but big Microsoft quarter could

Posted by Benjamin J. Romano

Those tracking the price Microsoft has offered for Yahoo know that it fluctuates every day because half of the compensation to Yahoo shareholders would be Microsoft stock. If Microsoft continues its pattern of better-than-expected earnings releases later today, its stock, and, in turn, the compensation to Yahoo's shareholders, could jump.

Continue reading this post ...


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April 23, 2008 9:44 AM

Globe-trotting Ballmer says Microsoft can go forward without Yahoo

Posted by Benjamin J. Romano

Microsoft CEO Steve Ballmer is sending more signals to Yahoo shareholders after the company's Tuesday earnings report. Take it or leave it was the message from Milan, Italy.

Continue reading this post ...


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April 22, 2008 1:47 PM

Yahoo reports Q1 ahead of expectations, sort of

Posted by Benjamin J. Romano

The bottom line: Yahoo posted first quarter 2008 revenue, excluding traffic acquisition costs, of $1.35 billion. That's at the higher end of the range it issued in January and reiterated in March. Earnings per share of 11 cents beat the Wall Street consensus of 9 cents per share. But that's what everyone was expecting the company to do.

Continue reading this post ...


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April 22, 2008 9:39 AM

Ballmer: Microsoft's bid for Yahoo won't change on today's earnings results

Posted by Benjamin J. Romano

Microsoft CEO Steve Ballmer, in Morocco to launch his company's North Africa Web portal, MSN Maghreb, has taken some of the tension out of this afternoon's Yahoo earnings report. Ballmer said Microsoft is not changing its bid, which stood at $43.1 billion, at the market close on Monday, regardless of Yahoo's performance.

Continue reading this post ...


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April 17, 2008 11:47 AM

Microsoft's Ballmer gives unvarnished take on Windows, online businesses

Posted by Benjamin J. Romano

Microsoft CEO Steve Ballmer spoke in Seattle this morning to one of the friendliest, but also most knowledgeable and critical audiences he faces: Microsoft's Most Valuable Professionals. In a jocular, hourlong speech and conversation, Ballmer gave some unguarded assessments of his company's position in online search; its bid for Yahoo; the success of Windows Vista; and its market acceptance vs its predecessor. Here are some of the highlights:

Continue reading this post ...


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April 11, 2008 8:13 AM

Microsoft wants 'self-regulation' of consumer privacy in online advertising

Posted by Benjamin J. Romano

In the midst of the maelstrom of online deals rumored to be in the works, Microsoft proposed a major plan for companies to self-regulate consumer privacy practices.

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Comments | Category: Advertising , Corporate governance , Legal issues , Online Communities , Online services , Public policy & issues , Security & privacy , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

April 10, 2008 6:18 AM

Analyst: Microsoft acquisition of Yahoo still 'most likely outcome'

Posted by Benjamin J. Romano

Having trouble keeping up with all the complicated deals rumored to be swirling around Yahoo and Microsoft? You're not alone. But at least one Wall Street analyst says when the dust settles, Microsoft's proposal to buy Yahoo will prevail.

Continue reading this post ...


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April 9, 2008 1:28 PM

Microsoft lashes out at Google-Yahoo search partnership

Posted by Benjamin J. Romano

Microsoft General Counsel Brad Smith just issued a statement responding to a test project between Google and Yahoo to work together on search advertising, which was just announced by Yahoo.

"Any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google's hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo! We will assess closely all of our options. Our proposal remains the only alternative put forward that offers Yahoo! shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers."

Continue reading this post ...


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April 9, 2008 9:48 AM

Microsoft-Yahoo letter exchange has one big investor favoring Yahoo

Posted by Benjamin J. Romano

One of the key goals of the public communications strategies that Microsoft and Yahoo are pursuing in their acquisition chess match is to sway investor opinion toward each company's position. But at least one major Yahoo investor is viewing Microsoft's ultimatum on Saturday as a "blunder."

Continue reading this post ...


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April 7, 2008 9:59 AM

Yahoo's Dear Steve letter

Posted by Benjamin J. Romano

Yahoo CEO Jerry Yang and Chairman Roy Bostock penned a lengthy response to Microsoft CEO Steve Ballmer's Saturday ultimatum. They're not opposed to a Microsoft takeover, it's just that "any transaction must be at a value that fully reflects the value of Yahoo!" and $31 a share ain't it.

Continue reading this post ...


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April 6, 2008 9:26 PM

Reuters source: Yahoo readying retort, wants Microsoft to pay more

Posted by Benjamin J. Romano

The quiet from Sunnyvale this weekend was broken late tonight. A person familiar with the matter told Reuters that Yahoo is not against selling to Microsoft once the price is right.

Continue reading this post ...


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April 5, 2008 10:31 AM

Microsoft to Yahoo board: Deal now or we're coming for your jobs, lowering bid

Posted by Benjamin J. Romano

Microsoft this morning released a letter from CEO Steve Ballmer to Yahoo's board of directors, reiterating many of the points the company made through the media yesterday and today. Ballmer gave the board three weeks to come to the table and negotiate an agreement.

From the letter:

"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.


"It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo!'s shareholders and employees. We think it is critically important not to let this window of opportunity pass."

Full text of the letter is after the jump.

Continue reading this post ...


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April 4, 2008 9:35 AM

WSJ: Senior Yahoo, Microsoft execs met, made no progress toward deal

Posted by Benjamin J. Romano

Another day, another anonymously sourced report on meetings between Microsoft and Yahoo in The Wall Street Journal. At least it's Friday.

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April 1, 2008 9:40 AM

Microsoft says through Wall Street Journal it's not raising Yahoo offer

Posted by Benjamin J. Romano

"There's no reason to bid against ourselves," someone close to Microsoft told The Wall Street Journal. The unnamed sources for the story insist "the stance isn't posturing."

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March 31, 2008 10:33 AM

Yahoo not holding back new initiatives with Microsoft bid pending

Posted by Benjamin J. Romano

Clearly not content to sit still as the Microsoft boa constrictor patiently tightens, Yahoo has churned out several new initiatives in the past two months. The latest is Shine, an Internet site focusing on women that it launched today. The site is getting a positive initial reception.

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March 28, 2008 12:05 PM

Microsoft in China, then and now

Posted by Benjamin J. Romano

There are a couple of interesting articles out today about Microsoft's relationship with China, past and future.

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March 26, 2008 3:17 PM

Yahoo, Microsoft search share declined in February, Nielsen reports

Posted by Benjamin J. Romano

Matching the trend reported last week in comScore's Internet search market share figures, Nielsen Online is out with its February report showing Google built on its enormous lead while Yahoo and Microsoft gave up ground.

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March 25, 2008 1:49 PM

Microsoft radar: Clock ticks on Yahoo; iPhone apps from Redmond?

Posted by Benjamin J. Romano

After a lull before and after Easter weekend, it seems the tidbits on the Yahoo acquisition front are starting to roll in again.

Continue reading this post ...


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March 19, 2008 3:12 PM

Google, Ask.com gained Internet search share as Microsoft, Yahoo slid in February

Posted by Benjamin J. Romano

In February, the total volume of U.S. Internet searches declined from a month earlier, as did the share of searches performed on Microsoft and Yahoo sites. Google's share increased, according to data just released by comScore.

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March 18, 2008 9:16 AM

Yahoo, justifying its 'no' to Microsoft, releases optimistic financial outlook

Posted by Benjamin J. Romano


SEC

Yahoo optimistic investor presentation today included this slide, which shows that the company's forecasts for revenue and cash flow growth are much higher than those of financial analysts.

Yahoo this morning publicized an optimistic investor presentation that spells out its plans to "roughly double operating cash flow over the next three years." The plan was shown to the company's board of directors in December 2007 and is being released now to support the board's determination that Microsoft's acquisition offer of $44.6 billion "substantially undervalues Yahoo."

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March 17, 2008 12:10 PM

Does Bear meltdown impact CEO Schwartz' reported role as Microsoft adviser?

Posted by Benjamin J. Romano


Bear Stearns CEO Schwartz.

Remember about two weeks ago when The Wall Street Journal reported that Bear Stearns CEO Alan Schwartz was brought on to advise Microsoft in its bid for Yahoo?

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March 14, 2008 9:41 AM

WSJ: Microsoft and Yahoo execs talked Monday

Posted by Benjamin J. Romano

Adding credence to reports Thursday that Microsoft and Yahoo were in informal negotiations, The Wall Street Journal today reported that the talks took place Monday and that no investment bankers were present.

Additional details from the Journal, which relied on unnamed "people familiar with the matter":

Continue reading this post ...


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March 13, 2008 10:03 AM

Microsoft and Yahoo in informal talks, CNET reports. Is the tide turning?

Posted by Benjamin J. Romano

CNET is reporting this morning "informal merger discussions" are taking place between Yahoo and Microsoft. The source is unnamed, and there are several caveats that make this soup taste pretty thin. But perhaps the tide is starting to turn on Microsoft's acquisition offer, now six weeks old.

Earlier this week, prominent tech pundits were again considering a scenario in which Microsoft waits for Yahoo's April 22 earnings report -- which could be ugly -- and then pulls its offer. Presumably, this would send Yahoo shares down the tubes. Then Microsoft could come back with a lower offer that investors and management (already under a barrage of shareholder lawsuits) would have to see as the only port in the storm.

I've asked Microsoft for comment on the CNET report, and any update on the status of the offer.

Meanwhile, TechCrunch has named four potential Microsoft candidates for Yahoo's board of directors:

-- Edward H. Meyer - former CEO, Grey Advertising
-- John Chapple - CEO, Nextel Partners
-- Tom Freston - former president, Viacom
-- Jaynie Studenmund - Former CEO, eHarmony


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March 13, 2008 7:18 AM

Does AOL's Bebo deal lower chance of potential Yahoo tie up?

Posted by Benjamin J. Romano

One of the would-be "white knights" who could rescue Yahoo from Microsoft's acquisition bid was rumored to be Time Warner's AOL unit. And with Rupert Murdoch publicly taking News Corp. out of the running earlier this week, AOL was pretty much the last alternative left in play for Yahoo.

Does that change with today's announcement that AOL is buying U.K. social networking site Bebo for $850 million in cash?

Continue reading this post ...


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March 10, 2008 10:32 AM

Microsoft radar: Murdoch not fighting Microsoft; user data methodology; Ozzie speaks

Posted by Benjamin J. Romano

News Corp. is not going to battle Microsoft for Yahoo, Rupert Murdoch told investors this morning. From Reuters: "We're not going to get into a fight with Microsoft, which has a lot more money than us," Murdoch said at a Bear Stearns media conference.

An interesting footnote on the methodology behind Louise Story's piece today on the amount of data being gathered on us by media companies. The New York Times paid comScore to tally this data. comScore tracked five types of "data collection events," such as videos served or searches entered.

Continue reading this post ...


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March 6, 2008 11:06 AM

Microsoft-Yahoo bid rumors; Ballmer joins Sonics full-court press; iPhone works with Exchange

Posted by Benjamin J. Romano

The New York Post chimed in this morning on Yahoo's move to postpone the deadline for nominating candidates for its board of directors -- seen as an effort to stave off Microsoft's acquisition. The Post's unnamed sources expect this to push Microsoft to take a more aggressive strategy.


"'[Microsoft CEO Steve] Ballmer is just one of many highly emotional people involved in this,'' said a source who has spoken with executives at both companies. ''Microsoft has been trying to avoid going completely hostile, but now it is going to get completely hostile.'"

More substantive details in the story, again from unnamed sources: Microsoft has readied a slate of Yahoo director candidates and could submit it as soon as next week. It is considering changing its bid to all cash. The value of the current bid, which is half stock and half cash, changes with Microsoft's stock price, and is down from $44.6 billion when it was announced to $41.5 billion, as of Wednesday's closing price.

Continue reading this post ...


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March 5, 2008 7:04 AM

With Microsoft offer still looming, Yahoo extends deadline to nominate directors

Posted by Benjamin J. Romano

Yahoo announced this morning that it amended its bylaws to extend the deadline to nominate candidates for its board of directors. The move gives Microsoft more time to select a slate of candidates favorable to its acquisition bid -- a strategy the company is widely thought to be pursuing. It also removes some of the pressure on Yahoo to come to the bargaining table as early as this weekend, as some observers have speculated.

The deadline, according to this news release, was extended from March 14 to "10 days following the public announcement of the date for Yahoo!'s 2008 annual meeting of stockholders. As the Company has not yet announced the date of this year's annual meeting, the amendment will give stockholders who want to nominate one or more directors, including Microsoft Corporation, more time to do so. The amendment does not preclude any party from nominating one or more directors at any time prior to the new deadline."

Meanwhile, another round of "white knight" talks are making headlines. This morning, The Wall Street Journal, quoting unidentified sources, reported that Yahoo is stepping up talks with Time Warner as an alternative to Microsoft's bid, worth $41.2 billion at yesterday's closing price. (Microsoft shares opened higher this morning.) Reports suggest Time Warner's Internet unit, AOL, would be folded into Yahoo, and the parent company would take a large financial stake in Yahoo.

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February 26, 2008 6:00 AM

Openess another MSFT-YHOO synergy?

Posted by Benjamin J. Romano

"If you didn't realize it, Yahoo! is embracing openness like never before."

That's how the company put it in a blog post Monday announcing its new open Internet search effort, the Open Search Platform. Of course, last week, Microsoft, which would like to acquire Yahoo, announced that it is also embracing openness like never before. Shows how closely the companies are aligned, right?

Microsoft pledged to open communications protocols and application programming interfaces (APIs) for its biggest products to developers, with a few catches. The company didn't say whether that would extend to its struggling Internet search efforts, but some analysts I talked to saw the broader strategic shift toward openness as a potential boon for Microsoft's online services efforts.

Here's what Yahoo is saying about opening up its Internet search platform:

"This open search platform enables 3rd parties to build and present the next generation of search results. There are a number of layers and capabilities that we have built into the platform, but our intent is clear -- present users with richer, more useful search results so that they can complete their tasks more efficiently and get from 'to do' to 'done.' "

Details were sketchy on the blog post and Yahoo says it will elaborate over "the next few months."

The company wasn't shy about extolling the benefits, however, which will flow to Web site owners, big and small, who will be able to build plug-ins that, once enabled, will present more detailed information -- including reviews, images and deep links -- on Yahoo Search than on the competition. These enhanced results will help generate more traffic and please users with better information, according to the blog post from Vish Makhijani, senior vice president and general manager of Yahoo Search.

Meanwhile, outlets including Search Engine Watch, have more details and analysis:

Yahoo will not feature or promote plug-ins that include advertising, or that are not relevant to users. And publishers will never be able to pay for placement in the gallery or other promotion by Yahoo. "This is not a paid relationship; it's all about relevance," Amit Kumar, director of product management for Yahoo Search, told the Web site.

But will it be enough to help lift the company's market share in Internet search? In January, Yahoo's share declined 0.7 points from December to 22.2 percent of the nearly 10.5 billion Internet searches performed in the U.S. Google remained the leader by a long shot with 58.5 percent. Microsoft held on to third, it's market share unchanged at 9.8 percent.

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February 22, 2008 1:34 PM

Microsoft employee e-mail reiterates reasons for Yahoo acquisition

Posted by Benjamin J. Romano

Microsoft just posted an e-mail Kevin Johnson sent to the company's Platforms and Services division earlier this afternoon restating the rationale for the company's $44.6 billion bid for Yahoo and answering questions about what it will mean to employees.

The company posted it on its Web site, so it's essentially an e-mail to Yahoo's employees, too.

The whole e-mail is here. I'll be picking out some key passages to highlight below.

Update, 2:30: The e-mail comes at the end of a week significant developments in the merger story. Microsoft has hired a firm to advise it on replacing Yahoo's board of directors, a signal that, as it stated, the company is pursuing all possible options to have its will be done including a costly and potentially acrimonious proxy fight.

Yahoo, meanwhile, instituted a beefed-up severance package for employees and top executives that would kick in if the company were acquired. It's a move that both encourages key personnel to stick around despite the looming acquisition and could make integrating the companies more costly and complicated. The developments were summarized in this AP story. Microsoft Chairman Bill Gates also told the AP earlier this week that the Yahoo acquisition is about the people.

Large portions of Johnson's e-mail are essentially a copy-and-paste job, covering the same ground Microsoft executives have been over in various forms since the proposal was announced Feb. 1.

He again addressed a source of concern at both companies -- that the combination would create redundancies in staffing and result in layoffs.

"Q: What impact would this combination have on staffing? Would there be any reductions?

"A: People are the single most important asset in this combination. We want the very best talent at the combined company, and we will demonstrate this to Yahoo! and Microsoft employees at each step of the deal. There's no question we will dedicate significant rewards and compensation to Yahoo! and Microsoft employees.

"While some overlap is expected in any combination of this size, we should remember that Microsoft is a growth company that has hired over 20,000 people since 2005, and we would look to place talented employees throughout the company as a whole. We have no shortage of business and technical opportunities, and we need great people to focus on them."

In describing the two companies' cultures, Johnson shed light on just how important advertising has become in the minds of Microsoft executives.

"Respect for both the creative and analytical aspects of advertising is core to both companies, along with recognition that advertising is an industry that represents opportunity and growth." (Emphasis added.)

Also, he noted that it's tough to define a Microsoft culture vs. a Yahoo culture because Microsoft with its 83,000 employees spread across businesses and markets around the world, has many cultures.

"At Microsoft today, we have a corporate culture, but individual teams develop, nurture, and retain a culture of their own as well. The culture of the combined entity will be shaped by individuals and teams from both Yahoo! and Microsoft."

One somewhat novel message is Johnson's instruction that Microsoft keep mum on what a combined company would look like. Particularly verboten are discussions with Yahoo employees.

"Prior to close of the transaction, no Microsoft employee should reach out to Yahoo! employees for the purpose of integration planning unless specifically instructed to do so by the integration team and its LCA advisors."

Do you see anything new in Johnson's e-mail? What questions remain unanswered?

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February 15, 2008 9:24 AM

New York Post: Yahoo's board of directors splitting

Posted by Benjamin J. Romano

Yahoo's board of directors could be starting to fragment, if a report in today's New York Post is to be believed. A faction, including new Chairman Roy Bostock and billionaire Ron Burkle, is emerging in opposition to another group sympathetic to co-founder and CEO Jerry Yang's desire to fight off the Microsoft bid, the Post reported this morning, quoting "one source close to the situation."

"The emotional part of Yang would rather do anything but sell to Microsoft, but he doesn't have the cards to come up with a value-creating, competitive alternative for shareholders," the source said.

The Post writes that the Bostock contingent "is worried that the Yang group might act out of emotion rather than their fiduciary duty, thereby exposing the board to shareholder lawsuits."

I discussed Microsoft's options for pressing ahead, after the Yahoo board rejected the initial $44.6 billion offer on Monday, with Richard Rafferty, a corporate and securities lawyer with Dallas-based Strasburger & Price. Here's a relevant part of our talk that didn't make the print story:

Among other widely reported options, Rafferty suggested Microsoft could try to persuade Yahoo board members individually.

"I hate to say this, but Microsoft could take a divide and conquer-type approach," he said, adding at the time that this was not a likely approach. "There's nothing that keeps them from contacting individual directors. They don't have to talk to the whole board."

He added that if those board members are well advised, they will refuse to talk individually and channel all communications through Yang. "Now, that won't stop the phone calls," he said.

It's also interesting that the Post's tipster references concern about "exposing the board to shareholder lawsuits," some of which have already emerged.

Continue reading this post ...


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February 13, 2008 11:03 AM

Agenda suggestions for a Yahoo board meeting

Posted by Benjamin J. Romano

Kara Swisher reported on Friday that Yahoo's board of directors would be meeting in person today. Asked about it on Monday evening, a Yahoo spokeswoman told me, "As matter of policy we do not comment on board proceedings."

If they are meeting today, they obviously have plenty to discuss, including:

-- Whether Microsoft will up the ante or get more aggressive (Yahoo board of director season opens today -- shareholders can submit director candidates, who would stand for election at the shareholders' meeting in late May or early June).


-- How things are going in the "negotiations," real or imagined, with News Corp. or AOL.

-- Google reportedly cooling to the idea of an ad partnership.

-- Whether to sell the 1,000 newly emptied desks and PCs around the company or put them in storage. This is the Twitter log of one employee who was "impacted." Step-by-step through your last day at work.

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February 12, 2008 4:01 PM

UW finance professor puts MSFT+YHOO in interesting context

Posted by Benjamin J. Romano

University of Washington finance professor Jarrad Harford, who helped me outline Microsoft's options after Yahoo's board of directors rejected its $44.6 billion buyout offer Monday, has conducted interesting research relevant to two aspects of mergers and acquisitions, and this deal in particular.

In one paper, he looked at how cash-rich companies fare when they go shopping (not all that well). In another, he researched how directors at a company targeted for acquisition balance shareholder interests with their own.

Cash-rich acquirers
Microsoft, with more than $21 billion in cash and short-term investments on its balance sheet on Dec. 31, is certainly cash rich, though less so than it was just a few years ago, thanks to stock repurchases and dividends.

Here's how Harford described his research, which looked at a broad set of companies and was published in the Journal of Finance, December 1999: "When managers have a lot of cash available to them, they don't have to go out and raise the capital and so they're not getting vetted at that point. They're not really being monitored by the capital market.

"You could very broadly paraphrase this as [cash] sort of burning a hole in their pocket," he said.

Companies in that situation, he found, are less careful about their acquisition targets and "their own natural optimism doesn't get put in check." As a result, "cash-rich firms are more active as acquirers and the acquisitions they make tend to be worse than average." He also found, quoting now from the abstract of his paper, that the targets of cash-rich acquirers tend not to attract other bidders and "mergers in which the bidder is cash-rich are followed by abnormal declines in operating performance."

Microsoft's proposal to buy Yahoo includes a combination of stock and cash from the balance sheet, as well as outside financing -- a departure from the company's norm. I asked Harford if that, plus the added scrutiny because the deal is particularly large and high-profile, means that it wouldn't fit the pattern described in his research.

"It certainly mitigates it in these extremely high-profile [cases]. This particular case actually does fit the pattern in the sense that they were cash rich and the market reacted pretty negatively to the offer" -- Microsoft shares are down about 13 percent since the proposal was made public Feb. 1 -- "But that doesn't mean that's what's going on. There's so much that goes into the market's initial reaction to a bid that you really need a large sample to kind of say what the trends are."


Directors at acquisition targets

Harford points out, in a paper published in the Journal of Financial Economics, July 2003, that company directors, like most people, have a natural drive for self preservation. Voting to accept an acquisition proposal could mean no more sitting in the big leather chairs.

"When a target director votes to accept a bid, he or she is basically voting him or herself out of a job," Harford said. The acquiring company usually brings only one or two key people from the target on to its board. "... A lot these [directors] are retired executives and they maybe have plenty of money, but they value the prestige of being involved in something like that."

They're supposed to be acting with the shareholders' best interests in mind, but they do face some conflict of interest in considering an acquisition, he said.

Harford's research found that if directors do the right thing -- or the thing that is perceived to be in the best interest of shareholders -- they will be rewarded in the long run. "If your company has been doing badly and you accept a takeover bid, than you will be asked on to other boards," he said.

This typically holds true for directors at firms that have been doing poorly under the current management and board, he said. The converse is also true, his research showed.

So if Yahoo's board ultimately rejects Microsoft's offer?

"Basically, they would be less likely to be invited onto other boards in the future," he said.

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February 12, 2008 9:19 AM

Yahoo does some buying of its own, scoops up online video provider

Posted by Benjamin J. Romano

If Microsoft buys Yahoo, the deal would now come with a shiny new online video platform.

Yahoo today announced the acquisition of Maven Networks, a Cambridge, Mass.-based online video platform provider, for $160 million. Its technology is "used to manage, distribute and monetize premium online video content for over 30 major media companies, including Fox News, Sony BMG, CBS Sports, Hearst, Gannett, Scripps Networks, and the Financial Times" among others.

Yahoo says in this press release that it intends to "expand on the Maven offering with video monetization services allowing publishers to take advantage of Yahoo!'s industry leading display sales force and advanced technologies for delivering consumers more relevant advertising experiences, both of which help them maximize their video advertising dollars."

Maven, founded in 2002, is a competitor of other high-end online video platforms such as Brightcove. U.S. online video advertising is expected to be a $4 billion market by 2011, according to a Forrester estimate cited by Yahoo.

(Update, 10:10 a.m.: A Yahoo spokeswoman says Maven has 70 employees and "we anticipate having them stay on board post acquisition." From the press release, "With this acquisition, Yahoo! has established a Cambridge, MA presence and Maven has become a wholly-owned subsidiary of Yahoo!.")

Combined with yesterday's acquisition of Danger by Microsoft, a mobile phone software maker, "it doesn't look like either Microsoft or Yahoo are slowing down their VC-backed acquisition pace," wrote Daniel Primack in this morning's PE Week Wire.

Meanwhile, the previously announced layoffs at Yahoo appear to be coming down today. The Wall Street Journal, citing an anonymous source, reports that roughly 1,000 employees are getting layoff notices.

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February 11, 2008 1:58 PM

Microsoft responds to Yahoo snub with more of the same

Posted by Benjamin J. Romano

Microsoft just issued a statement in response to the formal rejection of its $31-per-share bid:

It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.


We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.

A Microsoft-Yahoo! combination will create a more effective company that would provide greater value and service to our customers. Furthermore, the combination will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising.

The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal.

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February 11, 2008 1:45 PM

All the fuss is about this: U.S. online ad revenue up 27 percent to $25.5 billion

Posted by Benjamin J. Romano

Analysis firm IDC just reported that U.S. online ad revenue last year grew to $25.5 billion, up 27 percent from 2006.

That pot of money covers search, display and other forms of online ads, and it's projected to continue growing as advertisers follow people from old media to the Interne. That's why Microsoft is trying to buy Yahoo.

Their common rival Google has been the dominant player in this market, but, interestingly, Google's net U.S. market share "declined for the first time in two years due to slower growth in domestic fourth quarter sales," IDC found. It's a slight decline -- 0.5 percentage points -- to 23.7 percent in the fourth quarter. It still has more than twice the share of its two closest rivals individually.

IDC conveniently put the figures in context with the news of the day. Karsten Weide, program director for IDC's Digital Marketplace: Media and Entertainment service, said, in a statement:

"If a merger between Microsoft's new media business and Yahoo! would come to pass, the combined entity would have a net U.S. advertising market share of about 17% based on our 4Q07 data. It would not quite bring Microsoft-Yahoo! to where Google is in online advertising in the U. S., but it would give them a much better fighting chance than if they went it alone."

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February 11, 2008 10:50 AM

Yahoo's risks grow because of Microsoft acquisition proposal

Posted by Benjamin J. Romano

Yahoo has added some additional disclosure to the usual boiler plate safe-harbor statement on its SEC filings to reflect the "[f]urther risks and uncertainties associated with Microsoft's unsolicited proposal to acquire the Company." They are not that surprising, but it's interesting to see how the company's lawyers crafted the language and the degree to which the whole acquisition process throws a wrench in the works.

They include:

"the risk that key employees may pursue other employment opportunities due to concerns as to their employment security with the Company; the risk that the acquisition proposal will make it more difficult for the Company to execute its strategic plan and pursue other strategic opportunities; and the risk that stockholder litigation in connection with Microsoft's unsolicited proposal may result in significant costs of defense, indemnification and liability."

As far as I can tell, the language is new with today's SEC filings that reported the company's rejection statement and CEO Jerry Yang's email to employees.

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February 11, 2008 8:13 AM

Some Microsoft choices in response to Yahoo snub

Posted by Benjamin J. Romano

So far, Microsoft has no comment on the Yahoo rejection, a spokeswoman just told me.

Meanwhile, Seattle-based McAdams Wright Ragen analyst Sid Parakh issued a research note this morning outlining the potential courses Microsoft could take in response to Yahoo's rejection of its $44.6 billion, or $31-per-share, buyout offer.

The most obvious choice, and the one that Yahoo's board seems to be hinting at with its rejection statement today, is for Microsoft to up the price. "We expect Microsoft to be willing to pay up to ~$35 per share, going as high as $40, essentially valuing Yahoo! at $50 - $58 billion," Parakh wrote.

Another option is to "persuade shareholders to accept the offer," Parakh wrote. That's something Microsoft may already be doing, given reports that Microsoft CEO Steve Ballmer met with a major institutional shareholder last week.

Parakh does not explicitly explore the possibility of a proxy fight as other analysts have. This would involve Microsoft filing a slate of candidates for Yahoo's board of directors and convincing investors to vote for them. This truly "hostile" approach risks sending Yahoo's best employees to the exits -- and maybe to Google -- but it also potentially keeps the acquiring company from paying a premium for its target. The deadline to file for new Yahoo directors is March 13.

Parakh's third possibility is that Microsoft could also make a tender offer for Yahoo! stock. A tender offer, according to the Securities and Exchange Commission, is "a broad solicitation by a company or a third party to purchase a substantial percentage of a company's shares or units for a limited period of time. The offer is at a fixed price, usually at a premium over the current market price, and is contingent on shareholders tendering a fixed number of their shares or units."

A fourth way, Parakh suggests, is to "Offer other ways to drive co-operation (joint development, joint venture, etc.) between the two companies." That would represent an expansion of several places where the companies have formed alliances in the past, such as linking their instant messaging networks and working together -- with Google and others -- on the OpenID online digital identity program.

In general, Parakh is negative on the deal, noting that its cost is much higher if you lump in the 14 percent (and counting) hit Microsoft's shares have taken in the days since the buyout proposal was announced.

"[That] has wiped out over $43 billion (or 98% of its offer for Yahoo!) in shareholder wealth. Add to that the likely scenario in which Microsoft pays ~$50 billion for Yahoo!, Microsoft is essentially paying >$93 billion for Yahoo!"

Of course, Microsoft could walk from the deal, as CFO Chris Liddell suggested he is prepared to do in a New York Times interview we ran in today's paper. As much as he'd like to see just that, Parakh doesn't view it as a likely outcome.

"While we hope that Microsoft is unable to conclude the deal, we believe that such chances are low," he wrote.

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February 11, 2008 6:37 AM

It's official: Yahoo rejects Microsoft

Posted by Benjamin J. Romano

Yahoo's board of directors has "unanimously concluded" that Microsoft's $31-per-share offer to acquire the company "is not in the best interests of Yahoo! and our stockholders."

The board concluded that the offer "substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments."

The official word came in a short statement just posted to the company's Web site. No formal word on the $40-per-share price range that Yahoo had indicated it might accept in press leaks over the weekend.

The ball is in Microsoft's court. We'll post the company's reaction as soon as we learn it.

Update, 7 a.m.: In early trading this morning, investors are bidding Microsoft shares down (off 52 cents, 1.8 percent, to $28.04) and Yahoo shares up (up 55 cents, 1.9 percent, to $29.75), perhaps thinking that Microsoft is willing to pay more -- one of the company's several options.

Update, 7:20: The Wall Street Journal has an interesting perspective on a potential increase in Microsoft's bid for Yahoo. It looks at five major institutional shareholders that have large holdings in both companies. "[T]hey all are deal arbitrageurs of sorts now," Heidi Moore writes in Deal Journal. "... What might be good for Yahoo in this proposed deal could be bad for Microsoft, and vice versa. Yahoo's shares may rise dizzily on speculation that the search and Internet advertising company can get a higher bid."

What do those shareholders think about the early trading today, in which the companies shares moved nearly equal amounts in opposite directions?

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February 10, 2008 7:33 PM

Reports: Yahoo seeks to restart talks with AOL; MSFT may up bid

Posted by Benjamin J. Romano

With the expectation that Yahoo will formally reject Microsoft's $31-per-share offer Monday, it follows that the company would be chatting up other potential suitors. The Times of London is reporting that Yahoo has sought talks with AOL. The sourcing on this story is a little thin. The opening paragraph says, "the Times has learnt," but there's no indication on how or where. Later "a source close to Yahoo!'s thinking" tells The Times about the board's coming rejection of the Microsoft bid and that the offer "would have to be in the 40s [per share] to start talking, and we would have to get over regulatory issues." But no mention of whether that's where the paper learned -- er, learnt -- about AOL.

From the story:


"Although Yahoo! and AOL previously failed to join forces because of differences over price, it is hoped that the urgency created by an unwelcome approach from Microsoft and an impending economic downturn will spur the two into new talks. Google, which offered support to Yahoo! when the Microsoft approach was made public, also has a 5 per cent stake in AOL."

Also this evening, The Wall Street Journal is reporting that Microsoft "may sweeten its offer" in response to a rejection from Yahoo. "But any increase is likely to fall short of what Yahoo's directors believe would fairly value the company ... setting the stage for a protracted battle," The Journal reports, citing people familiar with the matter.

After a poorly timed week of vacation, I am back to work on Monday covering what is looking to be a long, complicated and really interesting acquisition battle. In addition to any formal word from Yahoo, we will be checking on a presentation Monday morning by Microsoft Chairman Bill Gates to the Office System Developer Conference in San Jose, Calif., to see if he has anything to say about the acquisition.

While reading to get back up to speed this evening, I saw that Mini-Microsoft has come out against the acquisition of Yahoo in a post this afternoon.

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February 1, 2008 12:07 PM

MSFT-YHOO: Why now?

Posted by Benjamin J. Romano

Given Microsoft's long pursuit of Yahoo, why was this the right time to bring the overture out in the open? There are several factors and theories, but let's start with a bit of history.

Microsoft CEO Steve Ballmer said in a conference call with six top Wall Street analysts this morning that "we have been engaged in conversations with Yahoo management off and on for the last 18 months. Last night I called [Yahoo CEO] Jerry Yang to discuss our proposal." (Transcript of the call is here: 12-page PDF.) He continued:

"A year ago, the Yahoo management team told us it wasn't really the right time to discuss an acquisition. We believed then in the benefits of combining the two companies, and we believe now in those benefits more than ever. That's why we're making it public today, so both sets of shareholders, employees, and customers can understand the incredible opportunity in the combination of Microsoft and Yahoo."

Some other thoughts on the timing of what is currently an unsolicited offer for Yahoo. (A quick aside: If Yahoo's board, which pledged to consider the offer "carefully and promptly," decides to reject the bid and Microsoft carries forward with it, it would then become a hostile takeover attempt.)

Matt Rosoff, an analyst at Kirkland-based Directions on Microsoft, said it's no coincidence that Google gave its bad news Thursday.

"They were waiting for Google's first bad earnings report to make this kind of deal. Yahoo has already shown weakness, so they have a better chance of succeeding in a hostile takeover. And it's right at the time when Google is stumbling."

Yahoo's slump helps, too. Making an offer when the company was trading around its 52-week low, which Yahoo was yesterday, is just good shopping. It's like waiting to buy those shoes you want until the Nordstrom's Half-Yearly Sale.

Also of note, Yahoo Chairman Terry Semel, who was most certainly in on the decision to rebuff Microsoft's earlier overtures, left the company Thursday, which was also the date of a company board meeting. Roy Bostock, a board member since May 2003, was elected to serve as Yahoo's non-executive chairman.

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February 1, 2008 10:21 AM

Microhoo or Yasoft?

Posted by Benjamin J. Romano

Not because we seriously expect them to change the name of the combined company, but because it's fun. Add your vote for one name or the other in the comments section, or feel free to suggest other names.

Meanwhile, Mike Fancher, editor at large of The Seattle Times, blogs about another potential combination involving a Seattle company. This one is only the future as imagined in "EPIC 2015, a wonderfully chilling short film that looks back at how the press, as we know it, ceased to exist."

The combined company? Googlezon.

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February 1, 2008 9:15 AM

What would MSFT + YHOO = for employees?

Posted by Benjamin J. Romano

Microsoft has close to 80,000 employees. Yahoo has plans to cut its staff of 14,300 by about 1,000 jobs, or 7 percent, later this month. So, combined, we're looking at a company with close perhaps 93,300 full-time workers.

Already, we're seeing some signs of anxiety over job cuts -- mainly in the divisions where Microsoft and Yahoo overlap. Mini-Microsoft gives voice to those concerns in this post:

"Internally, a number of us had heard reasons from Steve Ballmer why a Yahoo! acquisition didn't make sense. One that sticks in my mind right now is how if we acquired Yahoo! -- such a big company -- we'd have to naturally have layoffs within Microsoft to accommodate it.

"Maybe there are HR people wandering around Microsoft this morning asking, 'What color slip did you say? Pink?'

"Man, if I was in the Online Services Division I would be worried. Especially if Yahoo! did something my team did and did it well."

Earlier this morning, I asked Kevin Johnson, president of the Microsoft Platforms and Services Division, who has responsibility for online services, point blank about layoffs at either company. Not surprisingly, I did not get a straight yes or no answer.

He said the expanded ability to do research and development is a key benefit for the deal. "This is an opportunity to get that expanded R&D capability and really prioritize what they're working on so that we can expand the range of innovation that's taking place."

"Now, certainly, in combination with that, there are operational efficiencies that we will gain from this combination. And on the people front, much of the operational efficiencies certainly relate to the integration work where we've got to do a great job of getting the right people in the right jobs and making sure that we have the right amount of head count and resources, focused in the right areas."

In Microsoft's press release announcing the deal, it intends to "offer significant retention packages to Yahoo engineers, key leaders and employees across all disciplines."

I just got my hands on the internal e-mail Microsoft CEO Steve Ballmer sent to employees this morning. It is silent on the question of job cuts.

"As we move forward, we'll look carefully at how to bring our assets together to create the greatest value for customers, employees, and shareholders.

"During this transition period, I urge you to stay focused on your commitments and team goals. We are committed to communicating with you frequently as our leadership team works on bringing the two companies together."

The rest of the e-mail reads very much like Microsoft's press release and statements from Johnson and other executives. Not surprisingly, they're staying tightly on message. The whole e-mail is after the jump.

Continue reading this post ...


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February 1, 2008 8:05 AM

Microsoft's Kevin Johnson on proposed Yahoo acquisition

Posted by Benjamin J. Romano

Kevin Johnson, president of Microsoft's Platforms and Services Division, answered questions about integrating the two huge companies after Microsoft made a $31 per share offer for Yahoo this morning. Here is an edited transcript of my conversation with him:

Q: Why are you doing this and why is now the right time to do it?

A: Well first of all, this combined entity creates a more competitive company. It creates value for shareholders and it's going to enable us to enhance experiences for customers, whether they are end users, advertisers or publishers, and it creates great opportunities for the employees of both Microsoft and Yahoo.

At the end of the day, this is about creating a more compelling alternative to an increasingly dominant player in the industry.

Q: Does this essentially say that at this point Microsoft doesn't see itself as able to catch Google alone?

A: I'd go back to the Financial Analyst Meeting [in July 2007]. We outlined a value chain analysis and the taxonomy of user services and ad platform, and, look, we've been making good progress over this last year. We released the Windows Live Suite in November, a new release in Live Search last October. We successfully completed the first phase of integration with aQuantive. We've signed up new publishers to our ad platform. You know, look, we're pleased with the progress and we're very proud of the work that our employees have been driving in this area.

You know, the fact is that this is an industry where scale matters and by combining our resources with Yahoo, not only are we able to achieve scale economics, we're able to expand the R&D [research and development] capability, capture operational efficiencies and focus on new user experiences.

Q: Certainly one of the most important metrics for online advertising and success overall online is still search market share and I think it's fair to say both Microsoft and Yahoo have been steadily losing share against Google over the last year. On that front, what makes you think that combining two entities that are losing share is going to help against the one that's dominant and still gaining?

A: Well, there's two things. First, I'd point out, if you look at our share, I think we've been kind of holding share, and holding flat on share. The fact is this is a game of scale. By bringing the companies together we can create a more efficient operation and organization that scale enables us to eliminate duplicate capital costs, such as servers and data centers and infrastructure and by combining our R&D capability it allows us to have more engineers that focus on a broader range of products. Instead of having engineers both working on search indexes and core search relevance, we can have one team of engineers working on that and that frees up engineers to drive new innovations in search -- search verticals, new search user experiences. There's plenty of opportunity to drive breakthroughs in search.

Q: When I think about Yahoo, it's hard to think of something that they do that Microsoft doesn't also do in the area of online services. So what's your strategy going to be for combining those many overlapping services? Is it going to be a co-branding thing, or what do you see happening there?

A: First of all, through recent experiences with aQuantive and Tellme, we know how to do successful integration. And part of that successful integration is having clear, defined synergies we're working to get. A clear set of integration principles and then it's putting together a joint team of Microsoft leaders and Yahoo leaders who are going to work through a thoughtful integration process to make the decisions on how this lands. We're confident based on our recent success of integration with companies like aQuantive and Tellme that this process is the right process to yield great results.

Q: But aQuantive and Tellme had much less of an overlapping set of technologies or businesses they were in. It seemed like it was adding technology to what you guys were already doing whereas there are so many things that both MSN and Yahoo do that are essentially competitive and the same service. Will those go forward under the same name, or how do you see that part happening?

A: If you just take decisions around brands, you know, first of all, we've got a great set of brands, The Yahoo brand is a great brand and as part of this integration process, we're going to get leaders from Microsoft and Yahoo that are going to make thoughtful decisions, not only around the technology integration, but the user experiences and the brands. This is an opportunity to bring together the best of both worlds.

Q: Are you anticipating any layoffs at Microsoft or Yahoo as you combine the two companies?

A: A key part of this is the expanded R&D capacity. We're hiring engineers today and by combining resources with Yahoo this expands the R&D capability. This is an opportunity to get that expanded R&D capability and really prioritize what they're working on so that we can expand the range of innovation that's taking place.

Now, certainly, in combination with that, there are operational efficiencies that we will gain from this combination. And on the people front, much of the operational efficiencies certainly relate to the integration work where we've got to do a great job of getting the right people in the right jobs and making sure that we have the right amount of head count and resources, focused in the right areas.

I think we're confident, not only will we take advantage of this expanded engineering capability, but we'll be very thoughtful about the operational efficiencies that we can gain by getting the right people in the right jobs and the right amount of resources allocated to individual areas.

Q: What about combining the cultures of the two companies? Is that a big challenge too?

A: Our two companies share a common passion for innovation and creating opportunity and great user experiences through technology. And that passion for innovation is really at the core, and so together I think we're going to redefine how people and businesses think about information in the new age of the Internet and I think that common passion is really a glue that helps us bring the workforces together.

Q: What you've described is a complicated and extensive integration process. What's your best-case scenario for how long it takes after approval is granted?

A: Certainly, we're going to go through the integration planning process with the joint team of Microsoft and Yahoo, make thoughtful decisions about that. Some of the thoughtful decisions that will be made is sort of the timing of when and how things are sequenced.

But, you know, clearly we've got a certain set of integration activities that would happen on day one of closing and then certainly over some period following that. We're going to work through the set of things that get implemented to bring resources together.

Q: Do you face a risk here of spending so much focus on integrating the two companies that you don't get quickly to some of the benefits you've talked about?

A: Certainly, there is some -- you know, you look at scale economics. Combining our search inventory on the same ad platform, that's going to deliver better yield or better revenue very quickly. So there's certain synergies that will happen very quickly. he fact that on our integration plan, we've got to work to get to a single search index, a single ad platform. And by doing that, that means that we have one team of engineers working on that instead of two.

That enables us to now prioritize engineering work on new emerging scenarios such as video, mobile services, social media, social platforms. And so, I think there's a set of things that we can get immediately and as we deploy engineering resources on the broad set of priorities, there's things that will also be driven long-term.

Q: How big of a risk do you think you face from antitrust regulation on this?

A: We've worked closely with our legal counsel and we are confident we can obtain all necessary approvals in a timely manner. And we'd expect to close within the second half of this calendar year.

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