[photopress:IT_Jack_Ma.jpg,full,alignright]That headline, which is something less than positive, may well be correct. The story is that Microsoft will not buy all of Yahoo.
Earlier this month, Microsoft walked away from a proposal to acquire Yahoo for $47.5 billion, or $33 per share, after Yahoo turned down the offer, saying it would only settle for $37 a share. Which, to be blunt, was totally stupid. The company was never worth anything like that.
Now a new deal is perhaps being brokered which is short of a full-out merger.
What is very important from the point of view of China is that as part of the deal Yahoo will put its Asian assets, including significant minority stakes Alibaba up for sale.
Which brings the deal down to more manageable proportions and is very good news for Alibaba.
The new deal, if it happens, will have Microsoft working with Yahoo to try and provide serious competition for Google.
Collins Stewart analyst Sandeep Aggarwal estimates Yahoo’s search advertising business is worth about $21 billion, while putting the value of its international assets at $9.25 billion.
Shares in Alibaba dropped 4% on the new proposal, thanks to the greater uncertainty now hanging over the two companies.
For Alibaba getting out from under would be a good thing as Yahoo already has a presence in China and melding the two together would be nigh impossible. Indeed, there are those who think getting the Yahoo search engine to work with Microsoft will take years, if ever. They come from two different cultures, two different types of programming. Alibaba would be well out of it.
Combined, Yahoo and Microsoft would, in theory, have around a 30% U.S. share, compared with Google’s roughly 60%. But that does not factor in a large loss potential as Yahoo and Microsoft customers say stuff this for a complicated game of soldiers and move over to the simplicity of Google.
Note that the proposal from Microsoft would likely complicate ongoing discussions between Yahoo and Google. The two companies are still talking about a possible search advertising partnership but there is no way Microsoft would stand still for that if its purchase of part of Yahoo goes through.
Alibaba has been lining up investors to help it buy back the Yahoo stake, sources told Reuters earlier. That seems likely. If it happens it will make Jack Ma, in our illustration, very happy.
It is all a bit of a mess and will not be resolved for some little while. Best news for Alibaba is that it may be able to get right away from it. Which it should do.
Source: Reuters