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June - 2008 - issue > Tech Tracker

Microsoft seeks new alliance with Yahoo!

Christo Jacob
Friday, May 30, 2008
Christo Jacob
While Microsoft has dropped its dream to hook Yahoo! as a whole for $47.5 billion dollars, the company now seeks an alliance through a new deal with Yahoo!’s search business. The renewed talks between the two to have a joint venture for search related advertising are expected to mount competition with the search engine giant Google.

The company is continuing to explore its options to expand its online services and advertising businesses. Microsoft’s entry with the new proposal comes at a time when Yahoo! is in talks with Google for a similar kind of partnership and is believed to be aimed at scuttling a likely Yahoo!-Google partnership.

Before the details of the offer were publicized analysts said that the talks also offered both Yahoo! and Microsoft a chance to resurrect talks about a takeover without losing face – a takeover attempt by Microsoft ended abruptly the previous month when Yahoo! Rejected its offer, valued at $33 per share. is now. The failure of those talks prompted an attempt by corporate raider Carl Icahn to take control of Yahoo! by ousting the board at the company’s annual general meeting on July 3.

Icahn wrote in a letter to Yahoo! Chairman Roy Bostock that Microsoft’s bid of $33 per share is a superior alternative to Yahoo!’s prospects on a standalone basis. Moreover, Icahn said in his letter, “I believe that a combination between Microsoft and Yahoo! is by far the most sensible path for both companies, and more importantly it would be a force strong enough to compete with Google on the Internet.”

Icahn offered to back down from the proxy battle if Yahoo! revived the takeover talks with Microsoft, but it was unclear whether the more limited negotiations would satisfy that demand. In a statement Yahoo! said that it is exploring several “value maximizing alternatives” and it remains “open to pursuing any transaction” which is in the best interest of its stockholders.

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