SUNNYVALE, CA — Who knows why relationships don’t work out? Someone at both Microsoft and Yahoo! probably has the inside story on exactly why Yahoo! spurned the Redmond, WA-based giant’s high-dollar advances, but no one is talking. The only words from Yahoo! so far came in Monday’s official declination of Microsoft’s $44 million bid: The offer “substantially undervalues” Yahoo!’s financial worth.That hasn’t stopped pundits and analysts from wagging their tongues, however. The current hot bet in the continuing saga of Yahoo!’s romantic assignations is AOL.
According to The Washington Post, an anonymous insider involved in private talks has indicated Yahoo! “reached out” to AOL in an attempt to form powerful alliances in case Microsoft escalates Yahoo!’s rejection into a hostile takeover battle.
“Yahoo is contacting a number of possible partners, the source said, and it is unclear whether the company seeks a buyout or partnership with AOL,” according to the Post.
Analysts have said Yahoo!’s best bet to avoid a hostile takeover is to form search-advertising partnerships with both AOL and Google. Many analysts have indicated partnerships of that nature could improve Yahoo!’s cash flow and make the company more expensive for Microsoft to acquire. Reports last week said Google already has approached Yahoo! about such a relationship, based on the two companies’ shared dislike and mistrust of Microsoft.
The potential “click” where AOL is concerned is that Time Warner, AOL’s parent company, hasn’t been thrilled with AOL’s performance. The Dulles, VA, campus of the AOL division has shed employees, and last week Time Warner began intimating it might sell of part of the division. That has led some to speculate Yahoo! may be positioning itself to purchase AOL’s advertising business.
As the Post noted, “By letting Google handle its search-advertising service and buying AOL’s advertising business, Yahoo could be worth as much as $40 a share, a nearly 30 percent premium over Microsoft’s original offer of $31 per share.”
In addition, a deal with Yahoo! may be AOL’s only hope to avoid irrelevance, now that it no longer is a dial-up internet service provider. The company has had severe difficulties competing with the larger search entities.
“AOL’s options to find a future buyer would largely disappear if Microsoft were to acquire Yahoo! outright” because the acquisition would eliminate two potential suitors, Jeffrey Lindsay, an analyst with Sanford D. Bernstein, told the Post.
Yahoo!’s shares rose 67 cents on Monday, to $29.87. That represents a 50-percent increase over the stock’s price when Microsoft made its offer on February 1st.
