Microsoft has made a fresh approach to Yahoo about a deal to combine part of their online businesses, though this time the proposal stops short of a full acquisition of the internet media company, Microsoft said on Sunday.
The approach came in recent days after activist investor Carl Icahn acquired a significant stake in Yahoo and put pressure on the company to reopen negotiations about selling itself to Microsoft, according to a person close to the situation.
“Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo,” according to the statement. “Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo or discussions with shareholders of Yahoo or Microsoft or with other third parties.”
News that contact between the two sides had resumed came two weeks after Microsoft abandoned its three-month pursuit of a full acquisition, and prompted immediate speculation that the software company believed it had a better chance of success if it did not try to buy the whole company.
Shar Van Boskirk, an analyst at IDC, said that the software giant might be able to overcome the earlier disagreement over price if it only tried to buy part of Yahoo. ”Microsoft is most interested in their search engine and search marketing business,” she added.
Steve Ballmer, Microsoft’s chief executive officer, highlighted Microsoft’s interest in the Yahoo search business when he abandoned his pursuit of a full acquisition. In a letter to Yahoo at the time, he said that Microsoft had dropped its offer partly because of a potential search advertising alliance between Yahoo and Google, which has been under discussion for some weeks.
Microsoft’s use of Mr Icahn’s attack on Yahoo to try to reopen negotiations points to Microsoft’s careful maneuvering to try to secure a deal without itself turning hostile. Steve Ballmer, Microsoft’s chief executive officer, has not himself held any talks with Mr Icahn, a person close to the situation said.
”They are putting the word out that they are still at the table, which further complicates Yahoo’s strategy in competing against the board that has been proposed,” said Ned May, lead analyst with the Outsell research firm, referring to Yahoo’s argument that Microsoft was no longer interested in any negotiations.
News that Microsoft is pursing a deal that would only involve part of the company could hit Yahoo’s shares when trading resumed today. A takeover premium has crept back into Yahoo’s stock in recent days following Mr Icahn’s intervention.
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