Why do I feel like I've penned this post in the past? (oh, that's why)
Finally, in Act III of the Yahoo tragedy, Yahoo (NASD:YHOO) and Google (NASD:GOOG) ink a deal to shift some of Yahoo's search-based advertising to Google. The deal is non-exclusive and Yahoo has full control over how much of it's searches to Google. Yahoo projects incremental operating cash from from the deal in the range of $250-450 million in the first year on revenues of $800 million. The deal will not kick in for three and one-half months to give the DoJ time to review the deal from an antitrust standpoint.
So, who are the winners and losers?
Well, Microsoft (NASD:MSFT) and Steve Ballmer are the obvious losers (again). After investing a half-year focused on acquiring Yahoo and/or its search business, they come up empty and with no clear strategy for what's next.
Microsoft shareholders, however, are winners in the deal. The stock jumped a dollar yesterday, but more importantly, this might require Microsoft to focus their efforts in other areas (like acquisitions of Salesforce.com, Facebook and Omniture).
Google is the clear winner. They fend off any potential inroads by Microsoft and see their market share poised to climb higher.
Carl Icahn is a big loser. He jumped into the fray with only one viable exit strategy - a Microsoft acquisition - which is now pretty much dead. Icahn bought most of his Yahoo shares in the $25 range, so he's now down about $175 million by my calculations.
Yahoo will see a short-term benefit from this deal, but it does little to solve their long-term problems. The worst thing is that, rather than outsourcing search completely to Google, they are only moving some search traffic to them. As such, they will continue to invest in Panama and are unlikely to see any cost savings like they might if they dump search entirely. The deal will stave off the wolves but I'll be shocked if Jerry Wang is still running the company a year from now. Henry Blodget disagrees, though, saying it's a smart deal for Yahoo . Meanwhile, TechCrunch reports that it appears Yahoo's testing a new purple logo. That makes sense. A new strategy is too hard, so let's create a new logo.
And the biggest winners?
Readers of blogs, twitter and friendfeed who can finally stop seeing posts about MicroHoo (and focus on whether Twitter is down or up).
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