After almost 18 months of increasingly bitter negotiations, Microsoft is said to be closing in on a deal to buy technology rival Yahoo’s web search business.
Several reports emerged late on Thursday suggesting that late-stage talks were under way between the two companies, opening up the distinct possibility that Microsoft could finally take control of Yahoo’s search engine division.
An analyst with institutional investor ThinkEquity was quoted by investment website 24/7 Wall Street as saying a deal was “imminent”, while sources told influential Silicon Valley blog All Things Digital that an agreement was close to being completed.
It is not clear what the precise terms of the deal on offer are, but according to 24/7 Wall Street, it could see Microsoft shell out around $3bn (£1.8bn) to take over Yahoo’s search advertising operation. The deal, it suggests, would also see Microsoft agree to share revenue from the search business with Yahoo for several years.
Such a pact would bring to an end the tortured negotiations between the two companies, but it would be an incredible climbdown for Yahoo – which turned down the possibility of far more money when Microsoft launched an unsolicited $45bn bid to buy Yahoo in its entirety last February.
That offer was largely seen as an attempt by Microsoft to gain control of its rival’s search business, since the Seattle software giant has been desperate to increase its share of the lucrative search advertising market for several years. But Yahoo rejected it, saying that it believed it was worth far more money.
In the interim, relations between the two companies have been cool – and both sides have rejected rumours of reported negotiations.
However, with the two companies’ chief rival, Google, appearing not only increasingly powerful but also apparently immune to the worst effects of the recession, things could be changing once again. Microsoft’s attempt to claw back market share with its relaunched search engine – now called Bing – has failed to make immediate inroads, leaving the Windows giant still looking for a way to make its mark in the industry.
Taking control of Yahoo’s search business would give Microsoft almost 30% of the American market, more than trebling its sphere of influence.
According to figures from ComScore, Google controls around 65% of the search market in the US, with Yahoo 19.5% and Microsoft trailing in third with a little over 8%. Internationally, Google is even stronger.
Such a deal would be a further hammer blow to the reputation of Yahoo co-founder Jerry Yang, who led the charge against Microsoft and sparked a war of words with rival CEO Steve Ballmer.
Since the negotiations between the two collapsed late last year, however, Yahoo has brought in a new CEO, Carol Bartz – who may take a more pragmatic view of the situation given Yahoo’s financial struggles.
The company is due to release its latest quarterly results next week, and may be hoping that any agreement with Microsoft could take the edge off a disappointing fiscal period.
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