What Will Become of Yahoo?

Yahoo Inc. (Nasdaq: YHOO) continues to resist Microsoft Corp. (Nasdaq: MSFT)'s $44.6 billion acquisition bid, repeating today that the amount is too small. But Microsoft CEO Steve Ballmer has stated that if he is going to change the offer, it will be reduced, not raised. (See Microsoft Pressures Yahoo and Yahoo Answers Microsoft.)

Microsoft’s logic is that raising its bid would mean it is bidding against itself -- meaning Ballmer and company think Yahoo’s alternatives aren’t very enticing. Yahoo, on the other hand, says it is still exploring options, including a hookup with Microsoft (at the right price) or with another big company.

Some of these deals could have a huge impact across the telecom industry. (See Yahoo, Microsoft Merger Could Aid Telcos.) Here's a rundown.

News Corp.
Yahoo's recent talks with News Corp. (NYSE: NWS) have cooled, at least according to the News Corp.-owned Wall Street Journal. (See Yahoo Calls on News Corp.) But a deal here put Yahoo control of MySpace, while pairing Yahoo's carrier relationships with all the content News Corp. owns. The sum could be a formidable partner to deliver the next-generation services that telcos are looking to provide.

It's the kind of partner telcos want, according to Heavy Reading senior analyst Graham Finnie. "They’re not inventing the services," he says. "They know that they have to work with third parties more effectively. There are a lot of companies on the Web side who have interesting services but aren't earning money from them, and if telcos can find a way to monetize them, then it could be a mutual benefit for both."

Finnie bases his theory on a survey conducted in his most recent report, Reinventing the Telco: A Heavy Reading Progress Report.

Time Warner
Here's one the Wall Street Journal says has heated up. (See Yahoo Turns to Time Warner.) In exchange for Time Warner Inc. (NYSE: TWX) getting a significant minority stake in Yahoo, Yahoo would acquire AOL Inc. (NYSE: AOL) from the media conglomerate.

Yahoo already provides Web portal services for telcos. This deal would give it an Internet service provider, too, which means it could connect customers to the Internet, deliver its own content and services to them, hawk all the content that Time Warner owns, and place ads on the network. Forget about benefits for telcos; this could be a competitor to the telcos.

It’s likely that this alliance was only proposed by Google (Nasdaq: GOOG) just to thwart rival Microsoft. (See Google Masters Arrogance.)

But from a carrier standpoint, don’t you think that Google would love Yahoo's exposure to telcos? Yahoo provides portal services to AT&T Inc. (NYSE: T), and Google would certainly love to have its massive online advertising business get first dibs on that largest mobile carrier in the U.S. And as we found out last week, AT&T is a fan of Google's open mobile platform, Android. (See AT&T Likes Android.) The collaborative efforts there could be staggering, however unlikely they may be.

So now what?
While Yahoo explores its alternatives, Microsoft will try to force a deal by starting a proxy fight. Yahoo has delayed Microsoft from doing this by pinning the deadline for nominating new members to 10 days after the shareholders meeting date has been announced. (See Proxy Time, Part II.)

Investors might be starting to get impatient for a deal. Yahoo's shares slipped $0.66 (2.3%) to $27.70 today on the New York Stock Exchange (NYSE) .

— Raymond McConville, Reporter, Light Reading

tsat 12/5/2012 | 3:44:01 PM
re: What Will Become of Yahoo?
I doubt it. Yahoo's executive culture just can't stomach being bought by MS.

Pete Baldwin 12/5/2012 | 3:43:57 PM
re: What Will Become of Yahoo? I think you've got a point.

There's also a pride factor, with Yahoo being the former poster child for the new Internet and all that.

Contentinople's take (hint: the headline is "The Amazing Arrogance of Yahoo):
Raymond McConville 12/5/2012 | 3:43:54 PM
re: What Will Become of Yahoo? They've got to be facing enormous pressure from the shareholders though. Those people don't care whether it's Microsoft or whoever making the offer, they just want a return on their investment wherever it's from.
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