Yahoo - Microsoft deal won't die unless Google kills it

John Shinal · May 28, 2008 · Short URL:

 Hold the celebrations, all you startups who thought that Yahoo and Microsoft might come knocking on your door in the wake of their failed courtship.

Based on all the various reports out today, it looks like some kind of deal will be struck between Microsoft and Yahoo -- unless Yahoo partners up with Google instead. 

What seemed to be the most definitive account out today came from Business Week's Gene Marcial, that magazine's longtime deal scoopmeister through his Heard on the Street column. Marcial says that Yahoo is speaking to both Google and Microsoft.

Meanwhile, at the AllThingsD conference put on by the Wall Street Journal, Microsoft CEO Steve Ballmer turned non-speak into an art form when he said that the company had walked away from acquiring Yahoo and is now talking with them about "other things." "We're not rebidding on the company," he said, but didn't completely rule out a new bid.

The word is that large Yahoo shareholders, still in disbelief that CEO Jerry Yang and the company's board turned down a $45 billion offer, has been putting pressure on to sell of some or all of Yahoo.

The easiest deal will be one that sees Yahoo give its search business over to one of its rivals. It will be interesting to see if Yahoo can create a bidding war for that part of the company, which Google, as the dominant and fastest-growing search player, needs a lot less than Microsoft, which is a distant No. 3 in the market.

For cultural reasons and plain old Silicon Valley solidarity, Yahoo is likely more inclined to sell to Google. But if it turns down a better offer from Microsoft, the ranks of lawyers lined up with shareholder lawsuits aimed at the company will likely deepen.

The resulting deal, depending on how it's crafted and whether it passes anti-trust review, could reshap the search market and set its direction for the next few years. We'll keep watching this one. 

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