Microsoft "considering another bid" for Yahoo

 

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By Reuters

Posted on 6 Oct 2011 at 08:36

Microsoft is considering a bid for Yahoo, sources close to the situation said.

Microsoft joins a host of other companies looking at Yahoo, resurfacing as a potential buyer after a bitter and unsuccessful fight to take over the internet company in 2008.

Microsoft may seek a partner to go after Yahoo, one of the sources said, without identifying any parties.

No decision has been made and a bid may not materialise as there are internal divisions at the software company on whether it should pursue Yahoo again, a high-ranking Microsoft executive said.

Yahoo's value hasn't grown in years, and some executives feel we should buy something that is more forward-looking

One camp inside Microsoft is hot for the deal, believing that it would obliterate AOL as a competitor and create a strong web portal that can offer better products to audiences, advertisers and users, the executive said.

However, another camp is against the deal, feeling that if Microsoft is going to invest billions of dollars in an acquisition it should be one that has more growth potential. Microsoft last tried buying Yahoo in 2008, offering to pay as much as $47.5 billion.

"Yahoo's value hasn't grown in years, and some executives feel we should buy something that is more forward-looking," said the executive, who spoke on condition of anonymity.

Yahoo, Microsoft and the other potential buyers declined to comment.

Any auction process for Yahoo is still in the early stages, and the company's financial advisers - Goldman Sachs and Allen & Co - are preparing to send financial information to potential bidders, sources have said previously.

Big bite

Shortly after ousting Carol Bartz as CEO in early September, Yahoo said it was exploring strategic alternatives after receiving "inbound interest" from a number of parties.

The once-dominant internet pioneer is pursuing parallel tracks, sounding out deal options as well as engaging in a search for a new CEO.

Yahoo would be a big bite for any single private equity firm, especially at a time when financing markets for leveraged buyouts have dried up. Industry sources said private equity firms could take over the US operations and sell Yahoo's Asian assets to a buyer such as Alibaba.

But if Microsoft fully combined its Bing search business with Yahoo's, it would give it more than 30% of the US search market and make it a credible competitor to Google, said Sid Parakh, analyst at fund firm McAdams Wright Ragen.

Under a 10-year deal struck in 2009, Microsoft's Bing already powers Yahoo search, but it cedes 88% of resulting advertising revenue back to Yahoo.

Microsoft, with a cash pile of $53 billion, could certainly afford a deal, but some doubted the company would actually pursue it, given its previously failed bid and the existing Yahoo agreement.

"I think it's unlikely because they (Microsoft) have been down this path before," said Ben Schachter, an analyst with Macquarie Research.

"In a lot of ways they've gotten what they want out of it already, with the (Yahoo) search deal. I could make a case for a lot of synergies. But it's certainly not a strategic priority in any way."