Yahoo Filing Reveals Details of Microsoft Deal 65
CWmike writes "Microsoft will pay Yahoo $50 million a year for three years and will hire at least 400 Yahoo employees as part of the companies' recent search agreement, according to a filing with the US Securities and Exchange Commission. Yahoo's form 8-K, which appeared online on Tuesday, reveals a few additional details about the agreement. The deal, announced last week, will mean that Microsoft's Bing search engine will power Yahoo's search site and Yahoo will sell premium search ad services for both companies. Five years into the 10-year agreement, Microsoft can opt out of the exclusive engagement for Yahoo's ad sales services, according to the filing. If it does, Yahoo will then keep 93 percent of the search revenue generated on sites owned and operated by Yahoo, instead of 88 percent. But Yahoo can also decide to remain the exclusive premium ad sales provider, in which case it will settle for an 83 percent share of the revenue. If Microsoft doesn't end the exclusive arrangement, Yahoo's share of the revenue will go up to 90 percent."
Only one problem... (Score:4, Insightful)
Re:Only one problem... (Score:3, Insightful)
This deal assumes that people will use anything other than Google. There is no difference between zero dollars times 93 percent and zero dollars times 83 percent.
Together they will have 30% of the market share. How is that zero dollars?
yahoo should have accepted the original offer.... (Score:5, Insightful)
I still think I'd be pretty peeved if I owned Yahoo stock over the fact that they rejected Microsoft's buy-out offers. The last one that Microsoft made had Yahoo valued at $31/share. It's now trading at around $14.50. Given the fact that Google dominates the search engine market and Yahoo hasn't innovated anything in years does anybody really think it's likely that Yahoo will ever see a $31 share price again? They've entered an inexorable decline that will eventually end in them being bought out by someone (probably Microsoft) for a heck of a lot less than $31/share.
I'm kind of surprised that the board didn't sued for breaching their fiduciary responsibility when they rejected that offer. That was one heck of a deal for the shareholders and I'm extremely baffled that it was rejected.
The Failure of Microsoft's Search Efforts (Score:1, Insightful)
It is staggering to look at the money and effort Microsoft has put into attacking Google - and what a complete and utter failure it has been.
150 million in advertising, paid for media stories, and astroturfing "I'm a long time Google user and by golly I'm switching to Bing!" posts on web discussion boards. Plus silly marketshare inflating games like using Bing search links pretending to be news items on MSN pages.
All that and all Microsoft managed to do was get their search engine slightly higher than Yahoo's distant second place marketshare for a day or so and then plummeted right back down to last place around 8 percent.
Even worse is the fact that Microsoft's latest rebranding of their search product is at a lower marketshare than it was a year ago without the massive ad and PR campaign.
Yahoo gives MSFT their search engine tech too (Score:4, Insightful)
LoB
Re:Only one problem... (Score:3, Insightful)
There is no difference between zero dollars times 93 percent and zero dollars times 83 percent.
There is if you operate your business under the same accounting principles used by the Federal Government ;)
Re:yahoo should have accepted the original offer.. (Score:4, Insightful)
Yahoo! shares were between $30-$40 for the last few years before the collapse. Thing is, Yahoo! did not innovate and keep market-share according to this, but they had a slow decline as people turned to Google and others more and more because of better services.
This effectively means that they had an over inflated stock value at the time (also called a bubble). When talks with Microsoft began, a lot of actual value assessments were made, but because of the merge possibility the prices stayed hyped. Then they suddenly went down to reasonable values after the merge talks were canceled.
This is a normal market healing mechanism. People who are into stocks should know this, make some sane assessments on the base of performance, evaluate risks and then make sane purchase decisions.
In reality, everyone in that crowd just wants to make a quick buck without any economic reason what so ever. This is why I have zero pity for Yahoo! stock holders.
Re:yahoo should have accepted the original offer.. (Score:3, Insightful)
This is why having shareholders can suck for a business's bosses. If you want to do what's best for them, then the stock price pretty much steers your business decisions, regardless of what you might want for your business to do. I imagine that's why MS made the huge offer in the first place - even if the terms are sucky, your shareholders are going to want you to accept if it doubles their investment.
Re:This deal smacks of desperation (Score:3, Insightful)
If you knew anything about the business, you wouldn't say that.
Microsoft's search strategy is long-term. Giving up a sizable profit for now (I strongly doubt that they're losing money on it, but the numbers tell you their overhead pretty clearly) gives them:
-Yahoo's search engineers, who will move to Microsoft
-A company with experience in ad sales and portal development
-Over twice the market share
This is a long-term run at Google, not something to keep Slashbots entertained for the next week or so.
Re:This deal smacks of desperation (Score:3, Insightful)
Oh, and keep in mind that this lets them tie in and monetize Flickr (huge), Del.icio.us (also huge), and Yahoo's other services.