AOL has stepped in to help Yahoo fend off Microsoft’s advances. Microsoft in turn has approached News Corp media shogun, Rupert Murdoch, to strike their own deal to make ‘Microhoo’ happen.
WSJ reported their founder’s negotiation with Microsoft, detailing what could likely be a joint bid on Yahoo. The mind boggles at the possible combination of MySpace, Yahoo and MSN. Social networking, IM and email all in one package – certainly a juggernaut to challenge Google’s dominance in the Internet space. The complexities involved in joining these three separate entities might turn investors off, say analysts.
AOL-Yahoo’s deal would likely see Time Warner folding in its AOL unit into Yahoo, with Time Warner infusing the needed cash for Yahoo to buy back its own shares to ward off the Microsoft threat. In another interesting twist to the tale, Yahoo has been talking to Google about sharing search advertising, with Yahoo possibly outsourcing its ads to its rival.
Microsoft’s aggressive bid and its Chief Executive’s (Steve Ballmer) public threat to lower the bid has somewhat alienated the crowd it hopes to convince – the shareholders. Yahoo’s directors called Ballmer’s move ‘counterproductive’ in a letter responding to his call.
Whichever route Yahoo chooses – to give in to Microsoft or seek help from other partners – it won’t be a simple one. Teaming with Google would attract regulatory scrutiny, teaming with AOL is risky, especially when AOL’s lost a lot of value after joining with Time Warner and a partnership with Microsoft, while financially viable in the short-term, might still not be enough to keep it relevant in a space dominated by names like Google, Facebook and YouTube.