Microsoft Willing to Co-Finance Yahoo Buy: Report

Reports emerge that Microsoft may lend its financial muscle to a potential $10 billion buyout of the Internet pioneer.

Microsoft may invest in Yahoo

The saga of Yahoo's potential sale, which includes a possible proxy battle and overtures from Verizon, took another turn yesterday.

Deep-pocketed Microsoft is interested in helping finance a potential deal but not an outright buy of Yahoo, according to a March 24 report in Re/code. Citing sources familiar with the matter, the software giant is conducting exploratory discussions headed by Peggy Johnson, executive vice president of business development at Microsoft and head of acquisition strategy.

Microsoft is motivated to maintain a good partnership with whomever ends up acquiring the embattled Web company, said the report. Last year, the companies renewed and modified their 10-year search and advertising partnership (Yahoo Search is powered by Microsoft Bing) five years into the original pact.

"Over the past few months, [Microsoft CEO Satya Nadella] and I have worked closely together to establish a revised search agreement that allows us to enhance our user experience and innovate more in our search business. This renewed agreement opens up significant opportunities in our partnership that I'm very excited to explore," Yahoo CO Marissa Mayer said in an April 16, 2015 announcement.

Seeking to strengthen its position in a growing online ad market, Microsoft made a hostile bid for Yahoo in early 2008. Under former CEO Steve Ballmer, Microsoft offered to pay nearly $45 billion, representing a hefty 62 percent premium over Yahoo's stock price of $31 at the time. Today, Yahoo is reportedly seeking $10 billion for its core Internet business after spinning off its $30 billion stake in Alibaba, the Chinese e-commerce giant.

One company that is seemingly interested in Yahoo's online assets is telecommunications heavyweight Verizon. Last month it emerged that Tim Armstrong, CEO of AOL, was exploring a possible bid for Yahoo. Verizon acquired AOL last year for $4.4 billion. Both ex-Google executives, Armstrong and Mayer have reportedly known each other for many years.

Meanwhile, Yahoo's board of directors is facing pressure by activist investors.

In a letter to the board yesterday, Starboard Value LP, an activist hedge fund that owns 1.7 percent of Yahoo, proposed the ouster of the entire board, including Mayer, through a proxy battle. Starboard hopes the action will prompt a proper sell-off of Yahoo's core business. "The same management team and board that has failed shareholders for years wants shareholders to entrust them with one of the most crucial decisions yet to be made," stated Starboard founder Jeffrey Smith in the letter.

Starboard said it plans to nominate nine new candidates. Yahoo co-founder David Filo, who owns 7.5 percent of the company's shares making him Yahoo's largest single shareholder, is also high on Starboard's "remove" list.

Earlier this month, Yahoo announced it was streamlining its operations, shuttering sites and services as the company looks to improve profitability. Yahoo Games, LiveText, BOSS APIs (JSON Search, Hosted Search, Placefinder and Placespotter) and select regional media properties are set to be discontinued in the coming weeks, announced Yahoo Chief Architect Amotz Maimon on March 11.

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...