Yahoo won't be forced into Microsoft deal

 

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By Reuters

Posted on 4 Jun 2009 at 07:42

Yahoo boss Carol Bartz insists she's under no pressure to strike a deal with Microsoft, despite the emergence of the company's new Bing search engine.

"Yahoo doesn't have to do anything with Microsoft about anything," Bartz said at an investor conference.

"We are a damned big, important site," she added later speaking at the Bank of America US Technology conference.

Bartz said that combining Yahoo's search technology with Microsoft could provide important benefits of scale, which could improve the company's monetisation of its service. And she said a partnership could save Yahoo up to $700 million in costs - a more conservative figure than some investors had in mind.

The speech was the second recent comment by Bartz regarding a potential deal. Bartz told the audience at the All Things Digital conference last week that any deal for its search assets would require a partner with a "boatload" of money and the right technology.

Bartz said Bing will give Microsoft some "uplift" in the search market but will not fundamentally change the competitive dynamics there.

"It's not going to get scale through Bing. It's going to get some temporary interest," said Bartz.

Reducing costs

Bartz became chief executive officer of Yahoo in January, replacing co-founder Jerry Yang, whose tenure was marked by Yahoo's rejection of a $47.5 billion acquisition offer from Microsoft.

A priority for Yahoo is reducing its infrastructure, Bartz said, citing inefficiencies in the development of its various websites and unnecessary hoops that advertisers must jump through to buy ads on its sites.

Asked about how much money Yahoo could save through a deal combining its search assets with Microsoft's, Bartz said the potential savings were "not much more" than $500 million to $700 million.

That's less than some of the previous figures that have been cited. A 2008 Microsoft deal proposal, brokered by activist investor Carl Icahn - who now sits on Yahoo's board of directors - had pegged the annual cost savings of a search partnership at between $1.1 billion and $1.6 billion.

Yahoo responded at the time that no more than $750 million of direct cash costs would be achievable from a sale of Yahoo's search assets.

"People in the past have thrown around big numbers, but they didn't know what they were talking about. And by the way, there's been many cuts since then," Bartz said.

She also noted that any deal with Microsoft would be akin to Yahoo buying Microsoft's Office software, and noted, in response to a question, that she believed it might make sense for Yahoo to purchase Microsoft's money-losing internet assets, instead of the other way around.

Yahoo is the second biggest search engine, with 20.4% share of the US market in April, versus third-ranked Microsoft's 8.2% share, according to comScore.