After Microsoft's Goodbye, What's Next for Yahoo?
With the Microsoft deal apparently over and its stock taking a pounding, what's ahead for Yahoo?
So if all eyes are not on Yahoo going forward, what will its next move be? In his blog post, Yang touted the company's recent announcements, including opening its search platform, the launch of Yahoo Buzz and its AMP ad management platform, but none of those will bring shareholders the overnight value that Microsoft's offer would have. Jefferies and Company analyst Youssef Squali, who also expects litigation from shareholders frustrated at the rejection of Microsoft's elevated offer, sees Google as the immediate beneficiary of the talks breaking down over the weekend. "Outsourcing search (or at least a piece of its search business) to Google is likely to be its first move," Squali wrote. "Strategically, Yahoo will be bowing out of the search game and giving up the ability to offer an integrated search and display buy leaving the playing field wide open for Google to dominate." Government approval of any permanent search outsourcing deal could be a real problem for the companies. Department of Justice has already opened an investigation of the very limited trial of the program that the two companies have conducted, probing whether they were acting in an anti-competitive manner. By making the outsourcing agreement non-exclusive and substantially limiting the portion of its search terms given over to Google, Yahoo might make the arrangement more palatable to regulators, but Stifel Nicolaus analyst Blair Levin still thinks that the government would take a long look at the impact any deal would have on the competitive landscape of the search market. "The central question is where the DoJ would draw the line between clearly permissible experimentation (what they have been doing), and more impermissible full outsourcing that would essentially be the functional equivalent of a takeover, at least as to the advertising," Levin wrote in a research note. Other strategies to infuse Yahoo with a quick shot of value include some form of alliance or combination with another company to expand its ad network. The short list of potential partners, wrote JP Morgan's Khan, includes News Corp, eBay and Time Warner, which has been in active talks with Yahoo about a potential sale of its AOL unit. In essence, the speculative game of musical chairs seems far from over. The analysts agree that while Yahoo is free for the moment from Microsoft breathing down its neck, it still faces extreme pressure to demonstrate that its turnaround strategy is working, and soon. This article by Kenneth Corbin originally appeared May 5, 2008 at InternetNews.com.
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