We hear that the Microsoft/News Corp. negotiations, first reported by the New York Times tonight, aren’t the result of today’s Google/Yahoo news — a source tells us Rupert Murdoch and Steve Ballmer’s teams have “been on it for days, working hard”, and that Yahoo is understandably “pissed” about the attempted union.
Do the MSFT/NWS talks predate the GOOG/YHOO talks or the YHOO/TWX talks? We don’t know.
But wait a minute. Didn’t Rupert Murdoch say last month that he was done chasing after a Yahoo deal? No, he didn’t.
Instead, when asked about his interest in Yahoo last month at a Bear Stearns conference, Rupert backed away — but not all the way: “We’re not going to get into a fight with Microsoft, which has a lot more money than us.”
Our thoughts then:
Many of the news outlets covering Rupe’s appearance at the Bear Stearns conference have read his comments as definitive proof that News Corp. (NWS) is no longer pursuing a deal. We think it’s a bit less than that. While Rupe is entertainingly free-wheeling at these events, he also tends to parse his words fairly thoughtfully. Note what he didn’t say: “We are no longer pursusing any sort of deal with Yahoo.”
We think that’s telling. Asked about a potential Yahoo deal all the way back at NWS’s Q2 conference call, he dismissed the idea — but not entirely: “I think that day has passed but you never know,” he said. And in fact Yahoo and NWS were indeed chatting about the idea. We think the odds on this deal are very very low indeed. But we wouldn’t close the betting books just yet.
And Rupert’s interest in a NWS/MSFT/YHOO deal makes as much sense as his interest in a NWS/YHOO deal did earlier this year. Rupe has spent around $1.5 billion building up Fox Interactive Media (MySpace, IGN, Photobucket and some odds and ends) and by all accounts it’s been a heady investment. Even if FIM can’t meet the $1 billion sales goal he laid out for it last summer, it’s still likely to generate $800 – $850 million.
But if he can take FIM , plus some cash (he’s got about $3.5 billion on hand) and turn it into a 10% – 15% stake of a Yahoo/MSN/FIM combo, why wouldn’t he? Getting it done is a different matter. A source tells the NYT negotiations are “sensitive” and we imagine Rupe’s facing the same hurdles he did the last time around: Trying to convince a partner (in this case, Microsoft), that FIM is worth $6- $7 billion. But if he can get anything close, he should jump on it.
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