Authors: GGarza

Posted on Windows 7 News & Tips

Microsoft and Yahoo have had an on again off again partnership related to search engine elements and other proprietary features that Microsoft would like to add to its domain.
Well on Wednesday, the New York times revealed that Microsoft is officially trying to make an ownership connection with Yahoo. Three years ago Microsoft failed to buy control of the company. But that was then.

Now Microsoft has signed a confidentiality agreement with Yahoo. What’s behind the broad interest in Yahoo? Investors believe is a a rich assortment of products could be unlocked by providing stronger financial and personell management. One thing that is making the enterprise rounds is the fact that the Yahoo of today is in a weaker position than in 2008; it is behind Google and newer Internet players like Facebook. Nevertheless Yahoo remains a popular destination, with its news site along attracting 81.2 million unique visitors in August.

The Microsoft NonDisclosure Pact

What is the legal effect of signing a nondisclosure pact? Microsoft will get look at Yahoo’s books. This time around, however, it is unlikely to pursue its own takeover attempt. Instead, it may aid others.

Interested Parties
Microsoft is not the only interested party that want a second detailed look at Yahoo. There is the private equity firms Silver Lake and TPG Capital. But one problem has been dominant in the takeover bidding. Investment parties cannot talk to each other.

A growing number of parties have signed confidentiality pacts with Yahoo, an indication that there is dwindling resistance to certain requirements of the agreement, including one that prevents potential bidders from talking to each other. Now if Microsoft is not interested in buying Yahoo, it might be interested in helping other companies do so.
Under one possible scenario, Microsoft would contribute billions of dollars in financing as part of a consortium led by Silver Lake and the Canadian Pension Plan Investment Board. That group would borrow billions of dollars from banks as well.

Where Microsoft and Yahoo Stand Today

Microsoft tried in 2008 to buy Yahoo, but that did not go well. Now, however, he two companies have created a search and advertising partnership, in which Microsoft’s Bing search engine fetches answers to user queries while Yahoo’s sales force sells ads against those results.

What’s In it for Microsoft?

If this business operation goes forward, what does Microsoft hope to get out of it? There are two business scenarios that are of interest to Microsoft. First, it is preserving the pact appears to be the primary interest. This is due to the fact that the company receives 12 percent of that advertising revenue. Second, since Microsoft recently aquired Skype the Internet communications company, it may also push to integrate its newest acquisition, into Yahoo.

Bidders and Investors

The one question that still has to be answered here, is whether Yahoo’s board will acquiesce to the take over bid. There are several outlooks that don’t fare well for Yahoo.

While other companies have also signed nondisclosure agreements, like TPG, and only considered making only a minority investment in Yahoo. The problem with such a move is that it would involve Yahoo borrowing money to finance a stock buyback. Yahoo’s board may not like that because it would give that investor effective control of the company.

Yahoo has a 40 percent stake in the Alibaba Group, a Chinese e-commerce company that. But that company has been in talks with private equity firms about making its own bid for Yahoo. But so far it has not signed a nondisclosure agreement. So here we have Yahoo an investor maybe pursuing a bidding scenario by the company that it has invested in.

The Future of Yahoo

One way or another, the old independent days of Yahoo are gone. It has lost too much market share, and it has already been forced to enter partnerships that it never would have in the “good old days.” What ever goodwill the Yahoo em-premature caries, the board had better make a decision that is good for the company and its stockholders.

New York Times

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