Juan Carlos Perez, IDG News Service

In the end, the undoing of Microsoft’s bid for Yahoo. While the main reason Microsoft dropped its bid was a disagreement over price.

At least, that’s what Microsoft CEO Steve Ballmer maintains. As outlined in the letter he sent Saturday to his Yahoo counterpart, Jerry Yang, Microsoft discarded the option of a hostile takeover when Yahoo threatened to outsource part of its search advertising to Google.
Deriding the Google Factor

“We regard with particular concern your apparent planning to respond to a ‘hostile’ bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo today,” Ballmer wrote. “In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us for a number of reasons.”

It’s fair to assume that Ballmer’s hatred for the search giant grew this weekend.

An outsourcing deal would send a confusing message to Yahoo advertisers and prevent Yahoo from offering clients the benefits of a unified platform for both display and search advertising, Ballmer wrote.

He states convincingly that engineers working on Yahoo’s ad systems would head for the door, and that regulatory and legal problems would rain down on Yahoo and any company that acquired it.

“Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path,” Ballmer wrote.
Playing the Spoiler

[Source: Yahoo News]

By MICHAEL LIEDTKE, AP Business Writer

SAN FRANCISCO - Microsoft Corp. withdrew its $42.3 billion bid to buy Yahoo Inc. on Saturday, scrapping an attempt to snap up the tarnished Internet icon in hopes of toppling online search and advertising leader Google Inc.

The decision to walk away from the deal came after last-ditch efforts to negotiate a mutually acceptable sale price proved unsuccessful.

The talks reached a breaking point after Jerry Yang and David Filo, the co-founders of Sunnyvale-based Yahoo, flew to Seattle in the morning to meet personally with Microsoft Chief Executive Steve Ballmer and Kevin Johnson, who runs the software maker’s unprofitable online services division, according to someone familiar with the talks. The person was not authorized to speak publicly and asked not to be identified.

“Clearly a deal is not to be,” Ballmer wrote to Yang in a letter sent late Saturday.

Microsoft was willing to pay $47.5 billion, or $33 per share, up from the bid’s current value of $29.40 per share, according to Ballmer’s letter.

But Yahoo’s board demanded at least $53 billion, or $37 per share, according to Ballmer. That would have been nearly double Yahoo’s stock price of $19.18 at the time Microsoft first made its bid a little over three months ago.

And Yang, who became Yahoo’s CEO 11 months ago, wanted $38 per share in a Wednesday meeting, according to the person familiar with the discussions. That meeting was held the day after Yang and Yahoo Chairman Roy Bostock called to ask Microsoft not to withdraw its bid, the person said.

In a statement Saturday, Bostock reiterated that Microsoft had undervalued his company’s assets since the takeover tug-of-war began more than three months ago.

“We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo for success and leadership in its markets,” Bostock said.

The anticlimactic ending came as a surprise, given that many analysts believed Microsoft wanted to close the deal badly enough to pursue a hostile takeover — a risky maneuver that would have required an attempt to replace the Yahoo board that spurned rejected the bid.

Although he had threatened a hostile takeover attempt last month, Ballmer said he concluded that waging a so-called proxy battle was “not sensible.”

“Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition,” Ballmer wrote to Yang.

But Yahoo hasn’t necessarily faded from Microsoft’s cross hairs.

The software maker conceivably could renew its bid later this year if Yahoo can’t bounce back from more than two years of financial lethargy.

Should Yahoo’s turnaround efforts flop, many analysts believe the company’s stock would sink into the mid-teens and open the door for another takeover offer that would be more difficult to rebuff.

For now, at least, Microsoft appears to believe it has enough internal weapons to chip away at Google’s dominance of the booming Internet ad market.

“We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners,” Ballmer said. “While Yahoo would have accelerated our strategy, I am confident that we can continue to move forward toward our goals.”

Microsoft’s move intensifies the pressure on Yang to reverse the lackluster growth that has eroded Yahoo’s profits and depressed its stock price since 2005, making it vulnerable to an unwanted takeover.

Yang has projected that Yahoo’s revenue will rise by 25 percent in 2009 and 2010, propelled by an expanded Internet advertising network that’s using more sophisticated tools to target consumers.

But analysts haven’t raised their forecasts to anywhere near Yang’s predictions, reflecting doubts that may trigger a rebellion among Yahoo’s restive shareholders if it looks as if management isn’t delivering on its promises.

Yang, who started Yahoo with Filo in 1994 while they were graduate students at Stanford University, embraced the challenge in a Saturday statement.

“With the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history,” he said.

As part of its efforts to fend off Microsoft, Yahoo had been exploring a possible advertising partnership with Google and a merger with the Internet operations of Time Warner Inc. It’s unclear whether Yahoo will still pursue those deals now that Microsoft has backed off.

In his letter, Ballmer said Yahoo’s talks with Google were one of the main reasons he decided to not to pursue a hostile takeover. He described the alliance as “unwise from a business perspective” because Yahoo would cede too much power to Google in the lucrative search advertising market.

Analysts are divided on just how much Microsoft needs Yahoo.

One school of thought is that a Yahoo takeover could have turned into an expensive headache that probably wouldn’t start delivering dividends for two or three years. While Microsoft grappled with a Yahoo acquisition, Google theoretically could have benefited from the distractions and grown even stronger.

Without the Yahoo takeover on its plate, Microsoft can focus more on core software business with plenty of money available to buy more nimble Internet startups that could bolster its online operations.

But other analysts believe Yahoo — with 500 million users, a prized brand and the second largest ad network behind Google’s — represented Microsoft’s best chance to remain a powerhouse as the Internet increasingly defines how and why people interact with computers.

___

AP Technology Writer Jessica Mintz in Seattle contributed to this report.

[Source: Yahoo News]

SAN FRANCISCO (Reuters) - Yahoo Inc (YHOO.O) has three weeks to accept Microsoft Corp.’s (MSFT.O) $31 per share cash-and-stock offer or Microsoft will mount a proxy battle to win investor support for the takeover, Microsoft said on Saturday.

Microsoft Chief Executive Steve Ballmer said in a letter dated April 5 and addressed to Yahoo’s board of directors that “now is the time” to negotiate final terms of a deal, one which would mark the biggest takeover yet in the high-tech industry.

“If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors,” Ballmer wrote.

A Yahoo spokeswoman was not aware of the letter and would not immediately comment on Yahoo’s reaction to the move.

Ballmer said Microsoft is growing impatient more than two months after the Redmond, Washington-based software behemoth made its unsolicited takeover offer for Yahoo. At that time, the bid represented a 62 percent premium to Yahoo’s share price.

“While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement,” Ballmer wrote.

The Microsoft letter argues that the economy and the market for Internet stocks have deteriorated in the intervening period, and that Yahoo’s share of Web search and online advertising business has declined, referring to industry market reports.

“During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably,” Ballmer wrote.

Meanwhile, Yahoo has adopted measures that make a merger with Microsoft more costly, Ballmer complained.

(Reporting by Eric Auchard in San Francisco and Daisuke Wakabayashi in Seattle, editing by Philip Barbara)

The search engine aims to reach the 40 million women whose demographic is being described as “Chief Household Officer.”

By K.C. Jones
InformationWeek

Yahoo (NSDQ: YHOO) said it wants to give women a place to shine, with the launch of a new Web site.

Yahoo has launched Yahoo Shine, a site for what Yahoo says is an “underrepresented demographic.” The site will also give advertisers one “lifestyles destination” to reach the 40 million women between the ages of 25 and 54 who visit Yahoo each month.

It will combine Yahoo’s food, astrology, and health, content with fashion, beauty, and parenting sections, stories from publishers like Conde Nast, Hearst, Rodale, and TIME, as well as original content. The site will feature blogs submitted by users, as well sections on work and money and tips for the home.

“We’re executing on Yahoo’s starting point strategy by ensuring that women who start their day with Yahoo! are offered a more relevant experience,” Scott Moore, senior VP and head of Yahoo Media, said in a news announcement. “Yahoo Shine adds an important piece to our media portfolio, which already includes sites that are number one in the News, Sports, Finance and Entertainment categories.”

Yahoo said the site will have “attitude,” “personality,” and humor, while providing advice and secret tips like “a friend.”

Conde Nast Publications Vice President of Editorial Operations, Rick Levine, said the site will use many Conde Nast magazines and Web sites.

“By speaking to Yahoo’s huge audience, this partnership will give our great editorial properties a significant growth opportunity,” he said in Monday’s announcement.

Christopher Johnson, VP of content and business development for Hearst Magazines Digital Media, said that Yahoo is “pioneering a unique way to present content online.”

“With more than 130 million visitors each month to Yahoo in the U.S., Yahoo will become a giant megaphone for us and allow Hearst’s network of bloggers to elevate their voices and be heard by a much larger audience,” he said. “Increasing the visibility of our blog content is a key element in driving additional traffic and converting passive readers into loyal fans.”

Yahoo calls the demographic it’s trying to reach “Chief Household Officers,” or women who usually make household purchasing decisions and use the Internet heavily. The company predicts popularity among advertisers for consumer packaged goods, pharmaceuticals, and retail. The company cited an analysis by TNS Media Intelligence that predicted online ad spending in those categories would total $1.8 billion this year.

It’s like the Justice League of social media: Google, Yahoo, and News Corp.’s MySpace.com announced on Tuesday that they have formed the OpenSocial Foundation, a non-profit group to support the OpenSocial initiative that Google kick-started last year as a way to promote a universal standard for developer applications on social-networking sites.

The OpenSocial Foundation is expected to be formed within 90 days, with more OpenSocial partners from across the Web on board in addition to the three responsible for the announcement.

The specific purpose of the new non-profit, according to a release, is “to ensure the neutrality and longevity of OpenSocial as an open, community-governed specification for building social applications across the web.” It’s a particularly crucial move for Google, which has been eager to emphasize that OpenSocial is a community standard, not a Mountain View project.

“OpenSocial has been a community-driven specification from the beginning,” Joe Kraus, Google’s director of product management, said in a joint statement from the three companies. “The formation of this foundation will ensure that it remains so in perpetuity. Developers and websites should feel secure that OpenSocial will be forever free and open.”

Indeed, the OpenSocial Foundation will be an independent entity with its own intellectual property and governance policies. Related assets are expected to be in place by the beginning of July.

Google first announced OpenSocial in October as a response to the plethora of announcements on behalf of social-networking sites that they would follow in Facebook’s footsteps and create developer platforms of their own. With so many disparate developer strategies, the social-media landscape could grow even more fragmented, and Google launched the OpenSocial API (and later the Social Graph API) as a means to provide some connectivity. Major players like MySpace, LinkedIn, Bebo, and Plaxo, along with a host of smaller social networks and many that are unknown in the U.S., all opted to participate in the new initiative.

Some OpenSocial platforms, like foundation partner MySpace’s, are already live. Others are still in testing phases or have yet to make any kind of debut. Despite delays, the OpenSocial developer community appears to be unfazed.

The only major social network not to commit to OpenSocial in one way or another has been Facebook, the site that started the social-networking platform craze in the first place.

And Facebook won’t be joining the OpenSocial Foundation, either. “As the largest contributor to the memecached system, Facebook has long been a leader and supporter of open source initiatives but will not join the foundation,” a statement from the company read. “The company will continue to evaluate partnership opportunities that will benefit the 300,000 Facebook Platform developers while improving the Facebook user experience.”

At the core of the new foundation will be the practice of upholding OpenSocial’s tenets: that specifications are available under a Creative Commons license, that it’s shaped by the developer community and social networks’ user bases rather than corporate decisions, and that it will be committed to the development of the new Shindig open source reference implementation, part of the Apache Software Foundation incubator.

Open standards like OpenSocial, OAuth, and OpenID have been some of the most heated subjects of discussion in the social-media developer community over the past year, nearly dominating the conversation at conventions like the Future of Web Apps conference in February. With some of the biggest names in technology now noticing and jumping on board these formerly grassroots projects, they’ve gained a newfound legitimacy–not to mention the financial backing of a Yahoo or a Google.

But in a conference call with press and analysts Tuesday, executives from Yahoo, Google, and MySpace asserted that the OpenSocial Foundation will be a standalone body to the point that Google will relinquish its trademark on “OpenSocial” and the ownership of the Web site.

“This is just the next evolution in where OpenSocial needs to be heading, because it is a community-driven specification,” Google’s Joe Kraus said in the call.
[Source: News.Com]