Yahoo! Inc. CEO Jerry Yang's five-month conflict with Microsoft Corp. ended yesterday. The outcome may not be good for him or the Internet company's investors.
Yahoo said yesterday it scrapped talks after Microsoft refused to pay the $47.5 billion it offered last month. Instead Yang unveiled a partnership with Google Inc. While that deal may add $800 million to annual sales, it may not be enough to push the stock above $30, Canaccord Adams's Colin Gillis said.
``When Microsoft walked, it was a real walk,'' the analyst said. The New York-based analyst recommends selling Yahoo shares. ``This deal has the perception of damaged goods.''
The Google accord may make Yang more vulnerable in a proxy fight against billionaire investor Carl Icahn, who says Yang botched the Microsoft negotiations. Even if shareholders opt to replace the company's directors with Icahn's candidates, Microsoft is no longer showing an interest in buying Yahoo, owner of the second most popular online search engine.
Merrill Lynch & Co. Inc. and Citigroup Inc. cut their estimates on Yahoo's stock price, saying advertisers probably will shift more spending to Google. Yahoo, based in Sunnyvale, California, dropped 85 cents, or 3.6 percent, to $22.67 at 9:38 a.m. New York time on the Nasdaq Stock Market after falling 10 percent yesterday.
Microsoft rose 53 cents, or 1.9 percent, to $28.77. The world's biggest software maker doesn't want to buy all of Yahoo, even at the $33-a-share price it bid before the end of talks May 3. While Microsoft proposed buying just Yahoo's search business, its directors declined.
Co-founded more than a decade ago by Yang and David Filo, Yahoo had reported eight straight quarters of profit declines before Microsoft's bid and is now relying on its biggest rival for growth.
``This just reaffirms the view that Yahoo, and particularly Jerry Yang and David Filo, blew it,'' said Mark May, an analyst at Needham & Co. in New York. ``It's hard to see how this management team is going to be able to extract or create value anywhere near 33 bucks a share anytime soon.''
Yahoo will allow Google to sell advertising for some of its users' searches in exchange for a portion of the revenue from that advertising. The agreement, which covers sites in the U.S. and Canada, may add as much as $450 million in operating cash flow in the first 12 months, Yahoo said. The agreement isn't exclusive, meaning that other companies besides Yahoo and Google will be able to sell ads that appear on Yahoo's pages.
The accord has a four-year initial term, and two three-year renewals if Yahoo requests them. Advertisers will pay Yahoo directly for ad clicks through its Panama advertising system and pay Google when that company's ads appear on Yahoo's pages. Google will share a percentage of the revenue with Yahoo.
Yahoo spokeswoman Diana Wong didn't return a phone message seeking comment.
The Google agreement ``will strengthen our company's position,'' Yang, 39, said yesterday in a conference call. ``We believe that an open market is critical.''
Google was charging advertisers as much as 70 percent more per search as of late last year, according to Yahoo. The sales boost may add $3 to $5 to Yahoo's stock, depending on how the deal is implemented, said Jeff Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. U.S. government regulatory scrutiny of the agreement could siphon away some of that value, he said.
The U.S. Senate Antitrust Subcommittee will ``closely examine'' the arrangement, said Chairman Herb Kohl, a Wisconsin Democrat. Microsoft has said a Yahoo-Google deal would put more than 90 percent of the search ad market in Mountain View, California-based Google's hands.
Yahoo and Google are waiting up to three and a half months to give the U.S. Justice Department time to review the program before they adopt it.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aPGENllz_g44&refer=us
0 Comments:
Post a Comment
<< Home