Yahoo oracle Kara Swisher has been busy today. Here’s what she’s come up with:
- Furious Yahoo (YHOO) investors–including Carl Icahn–are pushing Microsoft (MSFT) to radically boost the value of its Google-alternative search deal and buy 33% of Yahoo for $30-$32 a share (instead of the 1/6th of Yahoo at $35 a share Microsoft offered in connection with its last search deal). Microsoft is seriously considering this.
- Owning 33% of Yahoo and having the backing of several major Yahoo investors would effectively give Microsoft control over Yahoo.
- Pressure from angry investors has convinced Yahoo chairman Roy Bostock (formerly asleep at the switch) that the company must do something with Microsoft soon.
- Under this plan, Jerry Yang and Sue Decker would likely be toast: Jerry because investors are apoplectic about his having blown the Microsoft deal, Sue because she has supported Jerry.
- Backing out of the Google search deal Yahoo signed two weeks ago will cost Yahoo $250 million.
- Two dissident Yahoo board members, who feel no one is paying attention to them, may quit out of frustration with Jerry.
- News Corp could be brought into the deal.
- Microsoft might also pay more than the $1 billion it previously proposed to buy Yahoo’s search assets, and give it bigger revenue guarantees.
Kara cautions that no “formal” talks have happened yet. Based on what our sources have told us, we continue to believe there have been some informal ones.
What This Means For You Yahoo Shareholders
If Microsoft bought one-third of Yahoo for $30-$32 a share, you would likely be able to sell one-third of your shares for that price. The value of the rest would depend on the company’s performance (which would, in part, depend on the value of Microsoft’s search revenue guarantees).
Likelihood That Yahoo Would Accept a Deal Like The One Above? High
Based on the level of frustration among Yahoo shareholders, we think Yahoo management would come under tremendous pressure to accept such a deal–especially if Yahoo chairman Roy Bostock supports it. $30-$32 for 1/3rd of the company is a far cry from the $34-$35 Yahoo could have had for the asking in February, but many Yahoo shareholders will likely thank heaven for small favours and rush to jump aboard.