Yahoo May Re-Consider Google Alliance, Rebuff Microsoft

anastasd writes "Reuters is reporting that Yahoo might consider a business alliance with Google as a way to top a $44.6 billion takeover proposal by Microsoft. 'Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, that source said. At $31 a share, Yahoo believes the bid undervalues the company, two sources said. A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing.'"

Comments

Re:What's in it for Google?

[EmbeddedJanitor]

Android is not really a seperate venture. It mainly facilitates extending their core business into mobile space so that your whole Google existance can fit in your pocket meaning more searches and uses of Google services --> more Google business.

This is very different from MS doing, say, Zune or MSN. In both the MS cases these are independent strategies that have no synergy with Windows or Office (ie. Windows and Office don't really benefit from Xbox and MSN).

Yahoo is popular outside of the US

[kylehase]

Here in Japan Yahoo is huge. Yahoo is the default portal for many Japanese on their computer and mobile browsers, in fact all Softbank (formerly Vodafone in Japan) phones don't have an Internet button but instead a Y! button. Unlike Americans who favor simplistic websites with lots of space for easy readability, Japanese tend to like cluttered pages with noisy interfaces. Perhaps it reminds them of the crowded streets and electronic billboards in Shibuya.

Yahoo is also an ISP in Japan with a rather large penetration.

Re:Yahoo is popular outside of the US

[erwanl]

Yahoo! in Japan is not Yahoo!. It's Softbank paying royalties to Yahoo! to use their brand, logo, and some of their technologies (like IM). That's why they have so many services that Yahoo US doesn't have (ISP, a leading auctions website...) Softbank bought the Japanese branch of Vodaphone (formely J-Phone, before Vodaphone bought it and screw it up). It's not a suprise that Softbank phone have a Y! button: it's the same company! Also, that's why there is no Japanese version of Flickr: because of their contract with Softbank, Yahoo! isn't allowed to release any product in Japanese.

Check your stats

[EmbeddedJanitor]

http://www.alexa.com/data/details/traffic_details/yahoo.com

Google and yahoo are neck and neck (with google slightly ahead for the last while). That gives google 1 & 3, or 50% vs 30% if you combine youtube + google.

Now look at http://finance.yahoo.com/q/bc?s=YHOO&t=2y&l=on&z=m&q=l&c=GOOG

Yahoo on the way down and Google (relatively) up.

Sure, Google could buy Yahoo for a quick rush, but in the longer term (1-2 years) yahoo will just fade by themselves unless they do something very interesting (which they have not done in a long time).

Re:Are they kidding?

[TubeSteak]

Undervalued? Do they really believe that? Or is that just negotiation strategy, because Microsoft offered much more per share than what the stock was going for. When they say "undervalued" it usually means "the company is worth more than [offer], in assets alone & we could get more money if we chopped Yahoo! up and sold it off piecemeal"

Re: A dose of reality indeed

[Anonymous Coward]

I don't think you understand what Google does. Your post infers that you see it as a technology company (you used the words innovation and openness, then go on to use the term "infrastructural lock-in like..." followed by "inter-operate" in the final paragraph). But in reality, Google is, at the moment, an advertising company that just so happens to specialize in technology... From Wiki:

"Most of Google's revenue is derived from advertising programs. For the 2006 fiscal year, the company reported US$10.492 billion in total advertising revenues and only US$112 million in licensing and other revenues."
-http://en.wikipedia.org/wiki/Google

So, I congratulate you on being a postgrad of competition law, but knowledge of the law doesn't mean anything if you don't understand the subject that you are trying to apply it to (IE: an advertising monopoly, NOT a tech monopoly). But what do I know? I'm just a naive and biased "techie" after all.

Re:just jacking up the price

[wannasleep]

Obviously, what you say is entirely possible. But even with a white knight defense, the acquirer better offer more than MS or it'll be a proxy fight and a gazillion lawsuits. From the point of view of the investor, it doesn't make a difference. Higher offer wins.

Having said that, there are plenty of anti-takeover defenses. From the "Nancy Reagan defense" (just say no), to staggered boards, to poison pills (Yahoo has one). As Peoplesoft teaches, there is nothing that can stop an acquirer determined to buy at whatever price.

Now, some math to predict what's gonna happen. There are roughly 1.5B shares. 25% of the shares changed hands on Friday. You can bet that most of them, say 20%,ended up on the hands of arbitrageurs. Legg Mason, a hedge fund has 8% and 11% are in the hands of another hedge fund. That makes 40% of the shares in the hands of people in search of the highest return, and screw everybody else. Most of the institutional holders are generally sympathetic to management, but they hold roughly 50% of the company (excluding the two hedge funds I mentioned before and what they sold in these few days). MS only needs another 10%. If MS are smart, they have already accumulated at least 5% (they have 10 days to report any ownership higher than 5% to SEC). Now on Jan 29 and 30 the stock volume spiked. Just the excess volume (over average) is 10% of the shares. Any guess who may have bought those shares? Watch for MS coming out next week with a 10% ownership.

So, let's say that Yang doesn't want to sell. He's got little or no stock. Filo has 5% of the Yahoo stock. The board may be loyal to Yang, but it must be very careful because the Revlon Duties have been triggered and they impose no loyalty. Once the company is in play, the CEO counts only as much as he can control the board.

So, here is what's gonna happen: if MS doesn't raise the price enough and Yahoo sells, MS (or another acquirer) and the hedge funds stay below 15% ownership to not trigger the poison pill. At the upcoming shareholders meeting (should be in May or June), a proxy fight erupts, and MS asks the poison pill to be repealed. The arbitrageurs vote yes, and somebody buys Yahoo. Most likely MS, but if somebody else has $50-60B, why not? The hedge funds don't care who wins as long as the company is sold.

Re:microyahoogle

[dwater]

Also, Yahoo! have a much better position in China that Google have. A lot of people here have a Yahoo! email address, but I don't know anyone with a Gmail address. Does Google Mail have a Chinese option, I wonder? I know Yahoo! does, and it even allows pop3 access for free, last I heard.

Of course, that can change quickly...

Re:Their (lack of) privacy policy

[gbobeck]

They link it up with private data held by other companies, and then they sell it to other ad companies, who then go on to pester you, perhaps send you target you with potentially embarrassing ads. Or they sell the info to prospective employers.

Have you ever read the Google and GMail Privacy Policies?

Some key facts (read: not a 100% complete copy/paste from the site) from the Google Privacy Policy (http://www.google.com/privacypolicy.html):

Google adheres to the US safe harbor privacy principles of Notice, Choice, Onward Transfer, Security, Data Integrity, Access and Enforcement, and is registered with the U.S. Department of Commerce's safe harbor program.

* Information you provide - When you sign up for a Google Account or other Google service or promotion that requires registration, we ask you for personal information (such as your name, email address and an account password). For certain services, such as our advertising programs, we also request credit card or other payment account information which we maintain in encrypted form on secure servers. We may combine the information you submit under your account with information from other Google services or third parties in order to provide you with a better experience and to improve the quality of our services. For certain services, we may give you the opportunity to opt out of combining such information.

For services Google offers which do not require a Google account or personal information, they may collect the following types of information:

* Google cookies

* Log information - When you use Google services, our servers automatically record information that your browser sends whenever you visit a website. These server logs may include information such as your web request, Internet Protocol address, browser type, browser language, the date and time of your request and one or more cookies that may uniquely identify your browser.

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* Links - Google may present links in a format that enables us to keep track of whether these links have been followed. We use this information to improve the quality of our search technology, customized content and advertising.

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Google only processes personal information for the purposes described in the applicable Privacy Policy and/or privacy notice for specific services. In addition to the above, such purposes include:

* Providing our products and services to users, including the display of customized content and advertising;
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Information sharing

Google only shares personal information with o