Microsoft and Yahoo! agree their agreements

Stephen Withers
Monday, 07 December 2009 01:24

IT Industry - Listed Tech

The long-running negotiations between Microsoft and Yahoo! have reached another milestone, with the companies reaching definitive agreements on their proposed search and advertising arrangements.

Back in 2008, Microsoft tried to acquire Yahoo! by offering $US31 per share (in cash and Microsoft shares), but the bid was rejected by the Yahoo! board.

A prolonged stoush followed, which included billionaire investor Carl Icahn threatening a proxy battle, gaining a seat on the Yahoo! board after reaching an accommodation with Yahoo!'s directors, and subsequently resigning.

In mid 2009, Yahoo! and Microsoft struck a deal which would see Yahoo! replace its own search engine with Bing, Microsoft handling self-service search advertising sales, Yahoo! selling premium search advertising, and both companies selling their own display ads.

Yahoo estimated that when fully implemented, it would realise $US275 million in cash flow and $US500 million in operating income annually, plus capital expenditure savings of $US200 million.

Microsoft also agreed to pay Yahoo! $US50 million a year for three years to help with "transition and implementation costs", as well as providing an 18-month guarantee on gross search revenue.

Now the companies have announced that they have finalised and executed definitive agreements regarding search and advertising services and sales, and licensing.

A joint statement read:

"Microsoft and Yahoo! believe that this deal will create a sustainable and more compelling alternative in search that can provide consumers, advertisers and publishers real choice, better value, and more innovation.

"Yahoo! and Microsoft welcome the broad support the deal has received from key players in the advertising industry and remain hopeful that the closing of the transaction can occur in early 2010."