Microsoft may still snap up Yahoo
Microsoft Corp, the world's biggest software maker, may succeed in fighting off rival suitors for Internet search company Yahoo! Inc because they can't offer as much to Yahoo's shareholders.
Yahoo, seeking alternatives to Microsoft's $44.6 billion bid, is in talks with News Corp, a person familiar with the discussions said. London's Sunday Telegraph reported on Feb 17 that Time Warner Inc's AOL is in talks with Yahoo. A partnership won't help regain the lead in search from Google Inc, 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 Officer Jerry Yang has resisted Microsoft's advances, pursuing another partner to keep his company independent.
Yahoo investors including Munder Capital Management's Ken Smith, Jacob Asset Management's Ryan Jacob, Legg Mason Inc'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.
The Sunday Telegraph didn't cite anyone in its report. Time Warner spokesman Keith Cocozza declined to comment. Tracy Schmaler, a spokeswoman for Sunnyvale, California-based Yahoo, didn't return a call on Monday, a holiday in the United States.
Teaming with AOL wouldn't give Yahoo investors the savings they would get with Redmond, Washington-based 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."
AOL had 4.6 percent of the US Web search market, behind Microsoft's 9.8 percent and Yahoo's 22.9 percent, according to December data from Reston, Virginia-based researcher ComScore Inc. Google dominates the market with 58.4 percent share.
Rupert Murdoch's News Corp, based in New York, also has discussed a transaction with Yahoo, a person with knowledge of the talks said last week. For News Corp and its MySpace social-networking site, Yahoo would provide little savings because it has no similar business of its own, Faber said.
Both AOL and News Corp's MySpace have partnerships with Google, which also probably would raise concerns with antitrust regulators in the US, according to Faber. A combination with Microsoft probably wouldn't because Google would still dominate the search market, he said.
Agencies
(China Daily 02/20/2008 page16)
