Microsoft's Made A Move On Yahoo!'s Search

The saga between Yahoo! and Microsoft continued on Friday with reports that Microsoft was willing to cough up $1 billion in cash for Yahoo!'s search business.

The reports, which were published on TradeTheNews, said the deal would have raked in an additional $1 billion in operating income for Yahoo! (nasdaq: YHOO - news - people ) annually.

The $1 billion offer was an alternative to a full acquisition and would have allowed Microsoft (nasdaq: MSFT - news - people ) to take control of Yahoo!’s search business.

Another option was for Microsoft to pay $8 billion for a 16.0% stake in Yahoo!, valuing the company at $35 a share.

The unconfirmed report said that Microsoft backed out of the Yahoo! deal because it didn’t believe it could get antitrust approval before the Bush administration left office.

By Yahoo!'s account, the two companies ended nearly five months of negotiations, which included a meeting on June 8 where the software giant "stated unequivocally that [it] is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested," the Sunnyvale, Calif.-based portal said in a statement. (See “ Yahoo! Says ‘It’s Over,’ Microsoft Disagrees”)

That range was $31 to $33 per share. Microsoft launched an unsolicited bid for Yahoo! at $31 per share on Jan. 31 and later raised the offer to $33. Yahoo! wanted at least $37, so Microsoft threw in the towel on May 3.
But Microsoft said the two companies continued to discuss an alternative transaction that Microsoft believed would have delivered more than $33 per share to Yahoo! shareholders.

Meanwhile, Yahoo! said it nixed Microsoft's offer to buy just its search advertising business, saying the transaction “would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! shareholders.”

Yahoo! announced late Thursday an agreement with Google (nasdaq: GOOG - news - people ) that lets the Web portal run ads supplied by Google alongside Yahoo!'s search results and on some of its Web properties in the U.S. and Canada. Yahoo! said the agreement is non-exclusive, giving it the ability to display paid search results from Google, other third parties and Yahoo!'s own search advertising marketplace.