Report: Microsoft seeks help for another Yahoo bid
SAN FRANCISCO (AP) - July 2, 2008 The latest twist in Microsoft's convoluted courtship caused
Yahoo's shares to rise more than 3 percent in Wednesday's sinking
stock market, even though the chances of a deal getting done still
seemed remote.
If nothing else, the enthusiastic reaction to the unconfirmed
report in The Wall Street Journal served as another reminder that
investors want Yahoo to pursue a different path than the one mapped
out by Chief Executive Jerry Yang.
And that could be bad news for Yang, who started Yahoo as an
Internet directory 14 years ago. Unless he can sway shareholder
sentiment before Yahoo's annual meeting Aug. 1, Yang could lose his
job in a boardroom coup being attempted by investor Carl Icahn.
Recognizing Yahoo's vulnerability, Microsoft is trying to
recruit News Corp., Time Warner's AOL or other media partners to
put together a joint bid that would slice Yahoo into pieces,
according to the Journal. The story cited undisclosed people
familiar with the discussions.
Microsoft declined comment Wednesday. A Yahoo spokeswoman didn't
immediately return a call seeking comment.
Under the reported breakup plan, Microsoft would emerge with
Yahoo's online search operations - the main object of the software
maker's desire since it began stalking Yahoo as long as ago as
2006.
After the two sides couldn't agree on a price, Microsoft
withdrew a $47.5 billion bid to buy Yahoo in its entirety in early
May.
Just two weeks later, Microsoft offered to pay $1 billion for
Yahoo's search engine and invest another $8 billion for a 16
percent stake in Yahoo's remaining business.
Yahoo rejected that offer, too, and instead forged an
advertising partnership with Google Inc., whose rapid growth
prompted Microsoft's bid for Yahoo in the first place.
Now, Microsoft is trying to figure out a way to carve up Yahoo's
business and hand off the non-search pieces to News Corp., AOL or
other media partners, the Journal said.
Neither News Corp. nor AOL are new players in this soap opera.
Yahoo explored possible deals with AOL and with News Corp.'s
popular online hangout, MySpace.com, while trying to fend off
Microsoft's advances. And Microsoft previously has talked to News
Corp. about making a joint bid for Yahoo.
Desperate to placate its peeved shareholders, Yahoo has
resurrected a previous proposal to combine with AOL and give Time
Warner a minority stake in the merged operations, according another
Journal story late Wednesday that cited unnamed people. The odds
also appear stacked against that idea working out, the Journal
reported.
Microsoft CEO Steve Ballmer had hoped to pitch his latest
breakup proposal to Yahoo in a meeting on Monday of this week, but
then canceled for unexplained reasons, a person familiar with the
situation told The Associated Press.
Yahoo hasn't heard another formal proposal since June 8, said
this person, who spoke on condition of anonymity because the
on-again, off-again negotiations are considered confidential.
Microsoft's talks with possible partners are still in a
preliminary stage and unlikely to culminate in a deal, according to
people who spoke to the Journal.
But the mere prospect of Microsoft returning with another offer
was enough to lift Yahoo shares 68 cents, or 3.4 percent, to close
at $20.88. Microsoft shares fell 99 cents to finish at $25.88.
Yahoo's stock price has sunk by 27 percent since Ballmer
withdrew an oral offer of $33 per share for the entire company in
early May. Ballmer walked away after Yang sought $37 per share - a
price that Yahoo's stock hasn't reached in nearly 2½ years.
Stanford Group analyst Clayton Moran estimated Yahoo's breakup
value at $20 to $24 per share, well below the $33 that Microsoft
offered in early May.
With its shareholders fuming, Yahoo has unsuccessfully tried to
persuade Microsoft to revive its bid for the entire company at $33
a share.
The impasse has deepened the animosity between the two
companies, with Yahoo denigrating its suitor as "unresponsive and
inconsistent" and Microsoft accusing Yahoo of engaging in
"revisionist history."
By floating the idea of a Yahoo breakup, Microsoft may be trying
to provide Icahn with ammunition for his attempt to overthrow
Yahoo's nine-member board. Icahn didn't return a call Wednesday,
but he has publicly stated he is opposed to doing a Microsoft deal
unless it involves selling Yahoo as a whole.
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AP Technology Writer Jessica Mintz in Seattle contributed to
this report.