Citigroup's Mark Mahaney says Microsoft likely to win Yahoo, but at higher price

Citigroup stock analyst Mark Mahaney tells Vator.tv managing editor John Shinal in this interview that Microsoft's hostile $44 billion bid for Yahoo will likely succeed, despite the hurdles it faces.

"If you were a betting person you'd have to bet that this deal goes through," although probably at a higher price than the $31 a share Microsoft offered, Mahaney says. He pegs the likelihood of a deal at around 55% - 60%.

The two parties held takeover talks last year that never led to a deal, and Yahoo's stock spent last year in a long, slow slide down. Then Microsoft CEO Steve Ballmer offered a large premium for the Internet pioneer earlier this year, launching the latest round of brinksmanship.

Yahoo's board rejected the bid and held talks with Google and News Corp., but Ballmer has said he will press his bid, with good reason, according to Mahaney. 

"Yahoo is extremely important to Microsoft strategically," he says.

The company has spent several years and more than a billion dollars to become a player in the online ad market and has only single-digit share of the U.S. market to show for it.

While buying Yahoo "doesn't convincingly solve the Google problem" for Microsoft, the software giant has few other options if it wants to succeed in online advertising.

In addition, Microsoft has shown, in its acquisition of online ad firm aQuantive and its stake in Facebook, that it is "willing to pay very high premiums" to acquire the pieces Ballmer thinks he needs to succeed in the market.