Today Yahoo and Microsoft announced a deal to combine their forces against Google. Yahoo gets to retain 88% of ad revenue ($500 Million in value over 10 years), and access to some of Microsoft's reach. And Yahoo gains$ 250 Million in savingsMicrosoft gets an instant bump in search marketshare - 28% vs 65% for Google. So what did the investment community think of this long time deal. Who came out on top....
Microsoft gained nearly $2.94 Billion on market value - nearly all of it at the direct expense of Yahoo, that lost $2.91 Billion. Ouch. Read TechCrunch's review of this Yahoo to Microsoft valuation shift.
Investors lamented that Microsoft paid Yahoo no money upfront and that it will share only 88 percent of search revenue from Yahoo sites with Yahoo.
"I was surprised at their decision to give the milk for free rather than forcing Microsoft to buy the cow," said Eric Jackson, a former Yahoo investor, who sold off his holdings in September after Yahoo turned down Microsoft's $47.5 billion buyout offer.
"Yahoo should have fought harder for a big upfront," similar to the search proposal Microsoft initially suggested last year after it failed to buy all of Yahoo, Jackson added. Reuters.
We think CEO Carol Bartz underplayed her hand and was out-matched by Microsoft. However, over time will this deal make sense - time will tell. We think it spells the end of Yahoo and possible Bartz' herself. And what about Google? We always believe that any innovation that Bing/Yahoo come up with - Google has the resources to quickly leap over- and maintain...and potentially grow market share. It is good that there may be competition for Google's search prominence, yet we believe that the combined marketshare for Yahoo and Bing will maintain current levels or drop off... stay tuned. If anything - the search market just got a little more interesting. Yahoo - RIP.
Updated: on the second day - yahoo dropped 3.43% -further eroding value.