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"A penny for your thoughts"

Thursday, August 7, 2008

Yahoo Inc. has rejected Microsoft bid on its online search operations

Update: Google has pulled the plug on a search-ad partnership with Yahoo that would have given Yahoo major new revenue but that raised antitrust concerns following indication from the Department of Justice that it would seek to block it, despite Yahoo's proposed revisions to address the DOJ's concerns. David Drummond, Google's chief legal officer confirmed in a blog post Wednesday November 5, 2008. Yahoo continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court. The deal's demise is a new blow to the struggling Internet pioneer, whose stock has plunged since Microsoft offered as much as $33 per share just months ago in an unfriendly acquisition attempt. Under the deal, Yahoo would have placed Google ads on some Yahoo search results, and the companies would have shared resulting revenue. Assistant Attorney General Thomas Barnett, who leads the Justice Department's antitrust division, said in a statement. "The arrangement likely would have denied consumers the benefits of competition--lower prices, better service and greater innovation." The biggest objection of the deal was from the Justice Department's antitrust regulators. Other objections came from Microsoft, which runs in third place in search queries and search advertising after Google and Yahoo, and, perhaps more notably, from the Association of National Advertisers. Given Microsoft threat to Google is much diminished andcouple with the fact Google would have benefited directly much less than Yahoo from the search-ad deal, it's not surprising that Google and Yahoo didn't see eye to eye about how hard to fight for the deal. Google already had a hard time pushing through its acquisition of display-ad powerhouse DoubleClick, doesn't want any more regulatory ill will than necessary. And given Google's dominance on search and advertising with trajectory for its third ambition, Web-based applications more government scrutiny seems inevitable.

Yahoo and Google had nevertheless proceed to lobby hard to bring their partnership to fruition, trying to explain the deal to Congress, the public, and regulators. But the companies weren't even close, as it turned out. The Justice Department remained unmoved, saying it would file an antitrust lawsuit to block the agreement.

Yahoo, which doesn't have to pay any termination penalty, now says it's moving on. Microsoft, which fought its own war with antitrust regulators, expressed predictable pleasure about the news--and the regulatory conclusion in particular. And advertisers who opposed the deal applauded the decision by the companies to step away from the agreement. VIA


Google Deal With Yahoo Draws More Opposition

October 5, 2008

It has being revealed by the Justice Department’s antitrust investigation in the United States that the advertising partnership between Google and Yahoo is mounting fear and resentment among the very customers that Google needs to keep expanding its business. The deal have raised concerns that prices will rise with Google’s increasing dominance of the lucrative and fast-growing search advertising business. Leading industry associations and advertising agencies has also asked the Justice Department and regulators in Europe and Canada to block the deal. Nevertheless some advertisers and agencies have said the deal could benefit them and their customers and could turn Yahoo, the No. 2 company in search advertising, into a stronger competitor to Google, the market leader. All the same they were uneasy about Google’s growing power and what they described as its inscrutable auction for pricing ads.It is pretty clear with Google that they want their algorithms to be more transparent. Yahoo signed the deal after merger talks with Microsoft broke off in June. Google and Yahoo have argued that the agreement, under which Yahoo can choose to place ads sold by Google on some of its search queries in the United States and Canada, would make Yahoo more viable. Since then, Microsoft has lobbied against the deal and raised antitrust questions.Nearly 30 major advertisers like Procter & Gamble, McDonald’s, Wal-Mart Stores and Bank of America, members of the association of National Advertiser’s board, had not found the companies’ arguments persuasive. The few large online advertisers like the Avis Budget Group and Buy.com said they support the agreement.

One argument, put forward by Yahoo and some of its supporters, is that Yahoo will use Google ads mostly on relatively obscure queries in which Yahoo does not currently have any ads. Yahoo will continue to show its own ads on more popular search terms and reinvest any extra dollars in improving its advertising system so it can wean itself from Google over time. Ther are others who believe that once Yahoo begins enjoying the extra revenue from Google, it will want to increase the percentage of its ads that come from Google to further increase its revenue. This will mean the eventual atrophy of Yahoo when Yahoo will seek to outsource more and more of its stuff to Google.

Even as major advertisers would like Google to have less power they are shifting more of their online spending to Google because its system delivers the best results for marketers. The Justice Department’s review on the antitrust investigation is expected to conclude perhaps before the end of the month. VIA



August 29, 2008 Google's Chief Executive Eric Schmidt said in an interview with Bloomberg on Thursday that the search giant plans to move forward with the partnership in October.Yahoo and Google, in announcing their advertising partnership in June, had said they would delay implementing their nonexclusive deal for 100 days, to give the U.S. Department of Justice an opportunity to review the transaction. The companies also signed an agreement with the Justice Department, in which a timeline was set out to move the regulatory review process along. Antitrust regulators at both the state and federal level are rushing to gather information and complete their respective investigations as a number of tight deadlines approach. Antitrust regulators, for one, are concerned there will be less choice for advertisers and pricing could be affected, which in turn could result in consumers ultimately being affected. The Justice Department, for example, is expected to reach a decision at the end of this month as to whether to challenge the transaction. By the third or fourth week of September, the companies will likely receive greater clarity on where antitrust regulators stand on their proposal. The companies are also concerned about antitrust regulators in Europe, especially in light of the recent fines and actions that the European Commission has taken against Google's arch rival Microsoft on antitrust matters. Wall Street, meanwhile, is largely expecting the advertising partnership to be approved, say analysts. VIA


August 9, 2008 Yahoo on Friday released a copy of its controversial search advertising partnership agreement with Google, marking the first time details of the deal have been made publicly available. But before laying your hands on a copy of the document, be forewarned that it is heavily redacted. Yahoo's advertising partnership with Google is currently receiving a formal review by the U.S. Department of Justice, which is examining whether the deal will raise antitrust issues. Meanwhile, various attorneys general are also investigating the deal for possible antitrust violations, including those in Connecticut, Florida, and Arkansas. Congress held a hearing last month to discuss the agreement, although it has no regulatory powers to either bless or nix the deal.
Under the agreement, Yahoo will serve up Google's advertisements alongside its own search results. Yahoo has previously said it does not believe its open-ended deal is anticompetitive, citing it is under no obligation to run a certain number of Google's ads, or give its competitor's ads favorable placement on its search results pages. Microsoft, however, contends the deal is anticompetitive in that it pushes two of the top three players in the Internet search advertising market together.
And in addition to the antitrust issues, legislators have raised concerns about potential privacy concerns regarding the search advertising partnership. Yahoo, however, on Friday announced it would provide users with an opt-out capability from its customized advertising feature on Yahoo.com. VIA


video
Video: Yahoo shareholders express frustration
CNET's Kara Tsuboi talked to dissatisfied shareholders after the Friday morning meeting in San Jose, Calif., and got an earful about their frustration with CEO Jerry Yang, Yahoo's stock price, and the general direction of the company.
(1stAug2008) Source:CNET News

video
Video: Yahoo meets its shareholders
CNET News' Kara Tsuboi and Stephen Shankland discuss the potential for fireworks at the annual Yahoo shareholder meeting. Angry revolt against CEO Jerry Yang's compensation package? Gripes about the yo-yo-ing share price? (1stAug2008) Source:CNET News


As described by Yahoo in a statement released late Saturday 12th July 2008, Microsoft packaged its latest offer with activist investor Carl Icahn, a billionaire who is seeking to overthrow Yahoo's board of directors in a shareholder meeting scheduled for August 1.






August 1, 2008 Yahoo Inc's board of directors won strong backing from shareholders at its annual meeting on Friday, with Jerry Yang, the company's embattled CEO, receiving 85 percent of the vote in his favor. Investors holding nearly 76 percent of Yahoo's 1.38 billion shares gave solid votes in favor of all nine current directors, in what represents an endorsement of their tough stance with Microsoft Corp in talks on a merger or partial sale. The solid vote in favor of the directors surprised even some Yahoo officials, who had braced for a stronger protest vote after the tumultuous Microsoft saga and older grievances over Yahoo's slipping performance against Google Inc. Three members of Yahoo's executive compensation committee -- Bostock, Ron Burkle and Arthur Kern -- each received about 80 percent in favor of re-election, with the remaining votes withheld in protest.In a measure of ongoing concern over generous option grants to executives and directors, owners of 339.8 million shares, or 32 percent of the voting stock, backed a non-binding proposal calling for a pay-for-performance plan that Yahoo had opposed. Others renewed calls for Yahoo to do more to protect the human rights of users in authoritarian countries such as China, after Yahoo was widely criticized for handing over e-mails to authorities that they used to jail political dissidents.

Yahoo had averted a proxy battle with billionaire Carl Icahn two weeks ago by reaching a settlement with the activist investor that will expand its board to 11 members from nine and result in Icahn joining the board. But one of Icahn's potential candidates appeared to drop out of the picture.

Yahoo shares slipped 9 cents on Friday to $19.80, not far above the $19.18 that they fetched the day before Microsoft made its interest public on February 1. Microsoft's last offer for the company would have valued Yahoo at $33 per share.
VIA




Yahoo! Inc. let loose a series of corporate tie-ups and business arrangements, in tandem with President Susan Decker's keynote speech at Advertising 2.0 in New York. The tie-ups include Wal-Mart, which will use Yahoo display advertising, an agreement with CBS as a distribution partner for its audience network, and a tie-up with Havas Digital for a multi-year global advertising partnership.Decker and Yang were kind of secretly hoping that these series of announcements would shift investor sentiment in their favor, and generate a bit of optimism about Yahoo's future.

Yahoo Inc. has rejected Microsoft's latest attempt to buy its online search operations in a "take or leave it" proposal that Yahoo said would have dismantled its Internet franchise.


Yahoo Chairman Roy Bostock said they will not be bludgeoned into a transaction with Microsoft that is not in the best interests of our stockholders.

Yahoo said it unsuccessfully reiterated its willingness to sell the entire company to Microsoft for $47.5 billion, or $33 per share -- a bid that the software maker dangled in early May before withdrawing it in a pique over Yahoo Chief Executive Jerry Yang's demand for $37 per share.





Yahoo's squandered opportunity to sell to Microsoft in May prompted Icahn to lead a rebellion aimed at removing Yahoo's entire board so he could fire Yang and try to revive sales talks with Microsoft.

Icahn's attempted coup gathered more steam earlier the week of 14th July. 2008 when Microsoft publicly announced it might be willing to buy all or part of Yahoo if shareholders voted to remove the current board. Yahoo shares climbed 10 percent during the past week on hopes that Microsoft's backing of Icahn might pave the way for a deal.






YAHOO! SENDS LETTER TO STOCKHOLDERS URGING SUPPORT FOR ITS CURRENT BOARD
Says Icahn/Microsoft Agenda Not In Best Interests of Yahoo! Stockholders
SUNNYVALE, Calif., July 17, 2008 — Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today sent the following letter to all stockholders from Chairman Roy Bostock and CEO Jerry Yang:
Dear Fellow Stockholder:
The recently-formed Carl Icahn-Microsoft alliance continues to make misleading statements about their plans for Yahoo!. Your Board of Directors believes strongly that the Icahn-Microsoft agenda — as presented to us jointly last week — will destroy stockholder value at Yahoo!, serving only their very narrow special interests, clearly not your interests.
Your Board continues to work to maximize value for you and is taking the following steps to do so:
• Moving forward with our strategic plan and strategies to lead in online advertising — with both search and display;

• Preparing to implement our recently signed commercial agreement with Google that will increase cash flow;

• Continuing to explore other ways to unlock value and return value to you such as unlocking the value of our Asia assets; and

• Remaining open to negotiating a value creating transaction (including with Microsoft) that provides real and certain value — not just the possibility of value.
In contrast, let's review Carl Icahn's brief involvement with the Company to date.
Carl Icahn bought his stock two months ago for an estimated average cost of less than $25 per share. He is well-known as a corporate agitator with a short-term approach to his investments . His short-term approach gives Mr. Icahn a strong incentive to strike any deal with Microsoft that enables him to recover his investment and get back his money quickly, even a deal that does not provide full and fair value to you. Is that in the interests of all stockholders? Clearly, it is not.
Mr. Icahn has severely handicapped himself in his ability to negotiate a favorable transaction with Microsoft . Why?
• Mr. Icahn has made it clear that his only objective is to sell part or all of Yahoo! to Microsoft. That fact, combined with his lack of an operating plan going forward, means that he will have no leverage to negotiate a fair deal with Microsoft. He has set himself up for failure.

• Second, Mr. Icahn and his slate lack the working knowledge of Yahoo! and its Internet business needed to do two things that are required to successfully deliver a value-enhancing transaction for Yahoo! stockholders. First, they do not have the detailed knowledge to negotiate a complex restructuring of a large, innovative high technology company in a rapidly changing environment. Second, they do not have the hands-on experience to manage and lead Yahoo! during the approximately one year period estimated to be required to gain regulatory approval for a deal or to manage and lead the remainder of the Company (non-search) after a transaction is completed. Don't take our word for that. Mr. Icahn will be calling the shots if his slate wins and yet Mr. Icahn himself told the Wall Street Journal last fall: "Technology hasn't really been one of the things I've focused on too much before" and "It's hard to understand these technology companies." That's why you need a knowledgeable, experienced and independent board to represent your interests vis-a-vis Microsoft.
Mr. Icahn can't make up his mind about what he thinks will work for Yahoo! . He bought his position believing that he could bring Microsoft back to buy all of Yahoo!, at one point suggesting we publicly offer to sell Yahoo! to Microsoft for $34.375. But he didn't do enough due diligence to determine what your Board already knew: that it was Microsoft's decision to walk away and that it had rebuffed repeated efforts by your independent directors to get a whole company acquisition back on the table. Recognizing that a sale to Microsoft might not be an option, Mr. Icahn said as an alternative that we should enter into an agreement with Google (which we were already negotiating and subsequently signed), and that we should walk away from Microsoft's search-only proposal (which we did after careful evaluation of that proposal). Then, in an extraordinary flip flop, Mr. Icahn teamed up with Microsoft and embraced their latest joint search-only proposal — even though it involved significant execution and operational risks and was fraught with flaws that made the "headline value" asserted by Microsoft and Mr. Icahn more illusion than reality.
How can Yahoo! stockholders trust Mr. Icahn to deliver what he claims he can deliver when his actions have been so contradictory —and when all he has delivered so far is a risky proposal of questionable value from his new friends at Microsoft? Yes, the Microsoft/Icahn proposal is somewhat of an improvement over Microsoft's last search-only proposal, but no one should confuse a modestly improved offer with a good offer. The Icahn/Microsoft proposal was more "smoke and mirrors" than objective reality.
Now let's turn to the recent marriage of convenience between Microsoft and Mr. Icahn.
This "odd couple" collaboration — between two parties with keenly different agendas — is indeed perplexing. Why does Mr. Icahn believe he can count on Microsoft to complete a transaction? Certainly Microsoft is a well-respected and successful company and we have been clear that we are fully prepared to do a deal with them. But Microsoft's flip flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo! either because:
• Microsoft can't decide what is and isn't strategically important to its online business;
or

• Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business — and the enormously desirable intellectual property associated with it — at a bargain basement price.
Microsoft desperately needs to improve the performance of its online services business (consisting of its search and display assets) which, cumulatively since 2003, has lost money despite billions of dollars of investment. And yet Mr. Icahn would ignore this track record and its implications for his fellow Yahoo! stockholders, swallowing a deal that leaves Yahoo!'s future dependent, in part, on Microsoft's ability to monetize search. And, as Mr. Icahn has himself pointed out , it would eliminate any opportunity we may have to sell the entire Company for an attractive premium.
In contrast to the conflicting and confusing statements emanating from the Icahn-Microsoft alliance, your Board and management have been crystal clear about our position.
First, we will sell the entire Company to Microsoft for $33 per share or more if Microsoft will negotiate a transaction that delivers certainty of value and certainty of closing . This is the simplest, most straightforward way to maximize value for you.
Second, we remain open to selling only search to Microsoft as long as it provides real value to our stockholders and resolves the substantial execution and operational risks associated with the separation of our search and display businesses .
Third, your Board takes seriously its obligation to examine all value-creating steps it could take and continues to actively examine many of these now, including a potential spin-off of our Asia assets and a return of cash to stockholders . These are steps Yahoo! could take, if we determine they are feasible and in our stockholders' best interests, without any "help" from Microsoft or Mr. Icahn. But they are complex steps that require care and prudence. These should not be adopted simply because Mr. Icahn and Microsoft are trying to dress up Microsoft's inadequate search-only proposal.
While your Board continues to evaluate the foregoing avenues, your current Board and management continue to execute on our strategy to grow the value of our unique collection of assets . That strategy is working and we believe it can result in substantial double digit growth in operating cash flow as we move forward. Our recently executed search advertising agreement with Google reflects our commitment to achieving our strategic goals, while preserving flexibility to pursue a sale of the Company or even, on the right terms, a sale of our search business.
Please compare and contrast the straightforward, responsible actions and positions of your Board of Directors with the behavior of Mr. Icahn and Microsoft.
There you have the situation, as we see it, put as simply and clearly as we can. We believe the Icahn slate and agenda present significant risk to your investment in Yahoo!. We believe you cannot count on Microsoft to bail out Mr. Icahn's misguided agenda, at least not on terms that are in the best interests of Yahoo! stockholders.
In contrast, your Board remains fully prepared to represent your interests aggressively and conscientiously in the effort to maximize value — whether that takes the form of negotiating a transaction that provides full and fair value, with certainty; finding other ways to unlock and return value to you; or moving forward with our accelerated strategies to lead in online advertising.
Your Board of Directors remains committed to maximizing stockholder value. It is — and will remain — our number one priority. Do not be fooled into thinking otherwise by Carl Icahn.
VIA




Since it dropped its bid to buy all of Yahoo, Microsoft had focused its overtures on Yahoo's search engine -- the second most used on the Internet behind Google Inc.'s.

Icahn, who has been challenging corporate boards for more than two decades, owns a roughly 5 percent stake in Yahoo and hopes to make a profit by pushing the company's stock price above $30.

Instead of selling its search engine to Microsoft, Yahoo opted to forge an advertising partnership with rival Google Inc. That represented a bit of irony because Google's dominance of the Internet search advertising market is the primary reason that Microsoft is pursuing Yahoo.

Yahoo has estimated that it can boost its annual revenue by about $800 million by relying on Google's superior technology to show some ads alongside the search results on its Web site.

But Yahoo's alliance with Google is being closely vetted by antitrust regulators because the two companies together control more than 80 percent of the U.S. search advertising market. To accommodate the review, Yahoo and Google have voluntarily agreed to wait until late September to begin working together.

Microsoft has maintained its proposal is better than the Google partnership. Microsoft in May offered to buy Yahoo's search operations for $1 billion and to spend another $8 billion to acquire a 16 percent stake in Yahoo's remaining operations. VIA
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