Minus Succor from Google, Yahoo Is Still Open to a Deal with Microsoft

By Clint Boulton  |  Posted 2008-11-05

Minus Succor from Google, Yahoo Is Still Open to a Deal with Microsoft

SAN FRANCISCO-Yahoo CEO Jerry Yang said he regrets that Yahoo and Microsoft couldn't come to terms on a merger earlier this year and that the best thing for Microsoft to do would be to buy Yahoo.  

Yang, speaking at the Web 2.0 Summit Nov. 5, exhibited a Zen-like calm for a leader under fire for the last several months. The statements, made to a packed house at the Palace Hotel, seem startling given that Yang was reported to be thoroughly opposed to joining Microsoft.

Still, in answer to Web 2.0 Summit co-host John Battelle's question about what happened with the Microsoft takeover bid, Yang said, "To this day I would say the best thing for Microsoft to do is to buy Yahoo. I don't think that is a bad idea at all."

Battelle broke in, suggesting "just at $40 per share," which was what Yang and the rest of Yahoo's board asked Microsoft to pay when Microsoft made its $33-per-share bid Jan. 31. "Oh no, I think that at the right price, whatever the price is, we were willing to sell the company."

Yang added the Microsoft walked away from the offer. Yang's stance clashes spectacularly with the legacy of media coverage of the back-and-forth between the companies after the deal collapsed. Many media outlets quoted sources close to Yahoo as saying that Yang was fiercely determined to keep Yahoo as an independent company.

Reports said Yang was particularly adamant about not doing such a deal with Microsoft, which is a traditional software company trying to become a provider of popular Web services. That, of course, is what Yahoo became famous for.

Google swooped in to the rescue. Google and Yahoo June 12 struck a search ad deal proposal designed to both enable Google search keywords to run alongside Yahoo results and keep Microsoft at bay.

When the U.S. Department of Justice pushed back on the deal because it believed the deal wouldn't maintain a level of fair competition in online advertising, and seemingly balked at Google and Yahoo's concessions, Google bailed.

Yang Considers Future in Wake of Failed Google Deal

When Battelle asked Yang about what happened with Google, Yang confirmed that Google walked away from the companies' proposed search ad deal, but told Battelle he'd have to ask Google why.

"Google clearly decided that they did not want to stay with [the deal]," Yang said.

Yang also said the DOJ did not understand "our industry" and that the agency's definition of the search advertising market was too narrow. "Things like this have unintended consequences on the ... industry," he said.   

Now Yahoo is back at square one. Yang said the company is not in negotiations with Microsoft but declined to comment on any dealings with AOL. The company's stock price is $13.93, nearly $20 less than what Microsoft was willing to pay.

Despite this, Yang declined having regrets over the last 15 years. He characterized what Yahoo has been through in 2008, including the failed acquisition bid, the mass employee exodus and the plummeting stock price, as "extraordinary."

This is a characterization that should interest Yahoo investors, who lost millions of dollars on the company. GigaOM's Om Malik provides a guilt trip post here.

The embattled chief also rebuffed Battelle's suggestion that Yang's ego kept the Microsoft bid from succeeding, noting that he is not adamant about Yahoo remaining independent. Again, this is contrary to media reports that Yang wanted to turn Yahoo around internally instead of aligning with Microsoft.

Whether this has always been the case or not, we may never know. What is clear is that Yang's cooperative stance is easy to take now that both Microsoft and Google have left Yahoo without a suitor.

The question now becomes: Can Yahoo turn itself around with Yahoo Open Strategy, the company's plan to rewire Yahoo and effectively open up its cores search and other Web services to the distributed intelligence of outside programmers?  

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