Microsoft and Yahoo have delayed signing their blockbuster search deal to finalize the details, Yahoo said in a filing with the Securities and Exchange Commission Oct. 28. Financial analysts did not hit the panic button on the news, as the companies don't expect the deal to be consummated until 2010, pending regulatory approvals from the Justice Department. Yahoo also hosted a financial analyst day Oct. 28 for the first time since 2007 and analysts who attended concluded the company is still on recovery road: Microsoft is coming to the rescue with the pending search deal.
Microsoft and Yahoo have delayed signing their
blockbuster search deal to finalize the details, Yahoo said in a filing with
the Securities and Exchange Commission Oct. 28.
The search engine rivals July 29 inked a 10-year deal in which Microsoft's Bing search engine would power
Yahoo's search results.
Yahoo would retain the look and feel of its revamped
search engine, which has been tailored to mesh better with the well-trafficked
homepage. Bing would serve the search results and monetize them with its ad
platform. Microsoft agreed to pay Yahoo 88 percent of traffic acquisition costs
during the first five years of the agreement.
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The companies originally pledged to finish negotiating
the deal by Oct. 27. However, in the filing, Yahoo said:
"Given the complex nature of the transaction, there remain
some details to be finalized. The parties are working diligently on finalizing
the agreements, have made good progress to date, and have agreed to execute the
agreements as expeditiously as possible."
This doesn't even constitute a bump in the road, as the
companies don't expect the deal to be consummated until 2010, pending regulatory
approvals. The Department of Justice is scrutinizing the deal, and groups such as the Association of National
Advertisers have asked the DOJ to swiftly approve
it because it's good for the online advertising market.
Financial analysts did not hit the panic button on the
news, as Broadpoint AmTech analyst Ben Schachter noted in a research note: "We
do not view this as anything more than both companies looking for a bit more
time to cross their t's and dot their i's."
Speaking of financial analysts, Yahoo hosted
a financial analyst day Oct. 28 for the first time since 2007 and
analysts who attended concluded the company is still on recovery road:
Microsoft
is coming to the rescue with the pending search deal.
Piper Jaffray analyst Gene Munster said he believes a a
full year implementation of the Microsoft deal could mean a 600 basis point
improvement to Yahoo's operating cash flow margins once the deal is fully
implemented in 2011.
More broadly, Bernstein Research analyst Jeffrey Lindsay
said Yahoo CEO Carol Bartz seemed apologetic in acknowledging that Yahoo had
lost the respect of advertisers and investors and was keen to win it back, with
the help of a
$100 million advertising campaign.
"We were encouraged by the intentions set out in
Yahoo's analyst day to improve display and paid search advertising, expand
overseas and continue improving Yahoo's platform and products," Lindsay
wrote in a research note.
Meanwhile, Yahoo is also rumored to be working on indexing Twitter content with the help of real-time
search provider OneRiot. That comes in the wake of deals Twitter inked to allow
Microsoft Bing and Google to index tweets for their millions of users.
How this would look once Bing is powering Yahoo -- Bing
already offers its
Bing Twitter Website -- is unclear.
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