Yahoo Could Save $1+ Billion Per Year Outsourcing Search To Microsoft

Jefferies analyst Youssef Squali runs the numbers on Yahoo’s (YHOO) potential search/display ad deal with Microsoft (MSFT) in a report today. His notes:

  • Outsourcing search infrastructure to Microsoft could save Yahoo $1 billion to $1.3 billion per year.
  • A 50/50 revenue share to sell display ads on Microsoft’s sites could bring in $600 million to $800 million in incremental annual revenue for Yahoo. (Assuming the display ad business doesn’t fall off a cliff.)
  • So, combined savings/revenue could be $1.6 billion to $2.1 billion per year. (Not bad for a company with $5 billion in annual sales.)

That’s based on a partnership, not an all-out asset swap. But one potential deal on the table, we’ve heard, is Yahoo buying MSN outright.

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