Rumours Swirl Of Microsoft Bid For Yahoo

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Microsoft plans to acquire Yahoo, claims Reuters. No such plans, counters Bloomberg. Who’s right?

A report from Reuters that Microsoft was seriously considering a bid for Yahoo was rapidly challenged by a Bloomberg report. Bloomberg drew its information from “two people familiar with the matter”, who refuted the rumour and stated that the software giant had no plans to acquire the Web-portal company.

The Reuters story suggested that Yahoo’s market value stands at $18 billion (£12bn), making it a significantly cheaper target than three years ago, when Microsoft tried to snap it up for $44.6 billion (£28.9bn). Reuters quoted “sources close to the situation” for its information.

Vulture Capitalists Circling

Other potential buyers are apparently circling a weakened Yahoo, which has lost ground on numerous fronts to competitors such as Google. In a bid for stronger market position, Yahoo previously entered into an agreement with Microsoft to have the latter take over its back-end search apparatus, in theory freeing up resources to develop more and better content for end-users. That deal worked out well for Microsoft, as it effectively doubled Bing’s search-engine market share.

When that deal was announced in the summer of 2009, Microsoft CEO Steve Ballmer told reporters and analysts: “This deal is not better than the last deal; it is different than that last deal.”

The drawbacks to a Yahoo-Microsoft search engine deal, he added, included a “higher tax rate and less money up-front”.

Microsoft has recently shown it is more than willing to snatch up a property for an eye-popping price. This summer, the company agreed to pay $8.5 billion (£5.5bn) for Skype, which will become a new business division. Skype in its new form will support Microsoft products, including Windows Phone and Xbox Kinect, in addition to integrating its services across the breadth of Microsoft’s extensive software portfolio.

In addition, Microsoft has entered into aggressive partnerships with companies like Facebook and Nokia. A number of the former’s features, including the “Like” button, now feed social data into Bing. Nokia recently agreed to drop its home-grown mobile operating systems in favour of Windows Phone, a deal that should yield new high-end smartphones by the end of 2011.

Whether that aggression will lead Microsoft into taking another run at a cheaper Yahoo, though, is evidently up for debate. Certainly, it would add to Microsoft’s growing line-up of cloud products and services; moreover, Yahoo’s millions of users represent a treasure trove of data that Redmond can use to refine its products.

But with so many deals already in progress, Microsoft might lack the appetite for digesting yet another giant company.

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