WSJ: Google ‘loses enthusiasm’ for helping Yahoo avoid being subsumed by Microsoft

“Google Inc.’s enthusiasm has waned in recent days for a potential advertising tie-up that could help Yahoo Inc. try to thwart Microsoft Corp.’s unsolicited takeover offer, people familiar with the matter say,” Kevin J. Delaney reports for The Wall Street Journal.

“A prominent Yahoo shareholder also predicted that the company would have a tough time avoiding Microsoft’s offer, echoing a view of other large investors that Yahoo’s sale to Microsoft is likely, though at a higher price,” Delaney reports.

“Yahoo directors have discussed the idea of a pact with Google, which analysts predict would boost Yahoo’s cash flow, as one of the alternatives that could help the Internet company in any effort to avoid a takeover by Microsoft, these people say. Under such an arrangement, Yahoo would outsource at least part of its search-related advertising to Google in return for a majority of the revenue,” Delaney reports.

“One of the people familiar with the matter cautioned against ruling out a Google advertising pact with Yahoo. But it doesn’t appear likely because of Google’s concerns about the intense regulatory scrutiny it could attract, given Google’s and Yahoo’s significant shares of the Web-search and online-advertising markets, the people say,” Delaney reports.

Delaney reports, “Google’s lack of enthusiasm could narrow Yahoo’s options and reduce its leverage for extracting a higher price from Microsoft.”

Full article here.

MacDailyNews Take: Rather than alerting The Wall Street Journal about their waning enthusiasm, wouldn’t it be in Google’s best interest to at least feign interest in the deal in order to force Microsoft to waste as much as possible on Yahoo? Who are these “people familiar with the matter” talking to the WSJ? Bill Gates and Steve Ballmer?

12 Comments

  1. Why should Google go out of its way to save Yahoo from M$? Google knows that the regulators would take a dim view of potential “collusion” from the two bigs in ‘net advertising. That kind of activity is reserved solely for M$ (except in Europe) ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

    Perhaps the real story behind all of this posturing is that Google simply wants to drive the price of Yahoo higher and make it that much more painful and unprofitable for M$ should the deal actually go through. Perhaps M$ never intended to purchase Yahoo at all, but was just hoping to get a little free publicity and pull Google’s chain at the same time, possibly goading them into an unwise response (such as a sparking regulatory investigation).

    I don’t believe that Google considers the potential merged MShoo to be a competitive threat. Perhaps they are afraid of M$’s deep pockets and their historical willingness to run operational losses in the pursuit of market share. That would result in a price war and reduced revenue for all ‘net advertisers. But M$ has yet to show me that they can succeed at any endeavor that is not underwritten by the Windows and MS Office cash machine.

  2. Even with Microsoft, Yahoo will die. So they should take the risk to remain on their own. They should break out their company into two:

    1) An online search engine/advertizing company “a la Google”.

    2) An online media company that will power all their web portals. And they should completely change the look & feel of those into something really nice and cool.

    A new Yahoo should be created. Steve Jobs should help them find their cool.

  3. I’m getting the impression that Yahoo doesn’t want to partner with the fine folks at Microsoft—as evidenced by their discussions with Google, AOL and News Corp. Yahoo is probably run by smug MAC lemmings who just don’t get it. Yahoo could probably use an infusion of Microsoft’s legendary and brilliant customer-focused innovations, notably Redmond’s fantastic work in the online space.

    Every other company on the planet would envy Yahoo’s position right now—except Apple. Whatever. Anyone who thinks they’re too good for Microsoft has some serious problems. That includes you MAC dorks with your “I don’t need Office, I can just use I-Work” nonsense. Give me a break.

    Your potential. Our passion.™

  4. @ Mac+

    “Even with Microsoft, Yahoo will die. So they should take the risk to remain on their own.”

    If Yahoo’s death is inevitable, it’s in the shareholders’ best interest to sell to Microsoft and let Microsoft take the loss rather than take the loss themselves… You have to think like a shareholder in these situations.

  5. The Yahoo management are just holding out for the highest possible price and then they will recommend the sale. As for Microsoft, they’ll be looking to provide online software, and a search engine as a secondary source of revenue. Both avenues will be funded via online advertising.

    However, the only outstanding Google success has been their search engine and the associated advertising revenue that it generates. This means it’ll take a hell of an effort by Microsoft to generate sufficient revenue to justify the buyout.

    The other issue is that Microsoft has recently taken out a loan to help fund the takeover. All up this will put even more pressure of Microsoft’s share price and the company will have to deliver the financial goods by the mid term. In sum Microsoft better get Vista working pretty soon or the pain they’re going through will surely increase. Just my two cents’ worth.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.