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Yahoo could warm to Microsoft offer
Microsoft, the world's biggest software maker, may succeed in fighting off rival suitors for internet search company Yahoo, because they cannot offer as much to Yahoo's shareholders.
- Bloomberg
- Published: 00:53 February 20, 2008
New York : Microsoft, the world's biggest software maker, may succeed in fighting off rival suitors for internet search company Yahoo, because they cannot offer as much to Yahoo's shareholders.
Yahoo, seeking alternatives to Microsoft's $44.6 billion bid, is in talks with News Corp, a source said last week. London's Sunday Telegraph reported on February 17 that Time Warner's AOL is in talks with Yahoo. A partnership will not help regain the lead in search from Google, said Canaccord Adams's Colin Gillis in New York.
"All this talk about Yahoo combining with AOL or News Corp is just noise," said Gillis, who advises investors buy Yahoo shares. "You're not curing any weaknesses. Shareholders would have a hard time loving a combination like that."
Microsoft would more than double its share of internet searches in buying Yahoo, and save as much as $1 billion a year by reducing overlap in their operations. Yahoo chief executive Jerry Yang has resisted Microsoft's advances, pursuing another partner to keep his company independent.
Backing
Yahoo investors including Munder Capital Management's Ken Smith, Jacob Asset Management's Ryan Jacob, Legg Mason's Bill Miller and T Rowe Price's Larry Puglia have said in the past two weeks they would back a bid if Microsoft increased the price.
Teaming with AOL will not give Yahoo investors the savings they would get with Microsoft, said Atlantic Equities LLP analyst Hamilton Faber.
This month, Time Warner CEO Jeffrey Bewkes said he will split AOL's shrinking dial-up internet service from the rest of the unit to focus on the online advertising division. Time Warner probably is examining whether to combine the ad division with Yahoo, Faber said.
"Time Warner may have the desire, but as far as Yahoo shareholders are concerned, it is not the best option," said London-based Faber, who advises investors to buy Yahoo shares.
"The synergies from combining AOL and Yahoo wouldn't be anywhere near as large as combining Microsoft and Yahoo."
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