Microsoft is continuing to flirt with the idea of making a bid to buy Yahoo, an aggressive move that experts think would sling the aging tech company back onto the cutting edge. The New York Times' Michael J. de la Merced reports at the DealBook blog that "Microsoft has signed a nondisclosure agreement with Yahoo, according to a person briefed on the matter, formally lining itself up as another potential bidder for the struggling Internet company." So does one aging tech company plus one struggling Internet company equal too much power? We have no idea, and despite what some of the Aeron-chair pundits (think: armchair pundits with a Silicon Valley spin) it's way too soon to tell.
The negotiations between Microsoft and Yahoo aren't even negotiations yet. As de la Merced explains, the signing of the NDA is just a peek into Yahoo's kimono: "By signing the agreement, Microsoft will join the private equity firms Silver Lake, TPG Capital and others in being allowed to take a closer look at Yahoo’s books." De la Merced goes on to explain that TPG and others have also signed the agreement and the Alibaba Group, which already owns a 40 percent stake in Yahoo, is also preparing a bid. Then comes the speculation:
Microsoft's primary interest in Yahoo appears to be in preserving the company's lucrative partnership with the Web pioneer. Microsoft's Bing search engine fetches answers to user queries, while Yahoo's sales force sells ads against those results.
The company may also push to integrate its newest acquisition, the Internet communications provider Skype, into Yahoo.
There's no mention of Facebook, despite Microsoft having invested $270 million for a 1.7 minority stake in 2007. But should Microsoft actually bid for Yahoo and should Yahoo actually sell a stake, the Microsoft-Yahoo tag team would be tapped into one hell of a colossal ad network, thanks to a recently inked deal between the two companies and AOL. Again, the negotiations so far are happening behind closed doors.
We do know based on a leaked internal memo from Yahoo's sharp-jawed co-founder and CEO Jerry Yang that the board is definitely fielding offers, and we might know sooner rather than later, what the company's plans are. Eric Jackson at Forbes dug into Yahoo's corporate by-laws and posited that the company is rushing to get a deal together for the new year:
What many are likely unaware of is that Yahoo!'s board is working against a key deadline coming up: January 7th. That's the day that anyone — but most likely Dan Loeb’s Third Point — could send in formal notice to Yahoo! for the directors it would like to nominate to Yahoo!’s board of directors formally as part of next year’s slate to be elected at the June shareholders’ meeting. According to the corporate by-laws, formal notice can take place as early as 120 working days before the anniversary of last year’s meeting. That’s January 7th.
So it looks like somebody is going to have a busy holiday season. Yahoo, for one, is probably wishing for a big boost back into relevance. The Internet dubbed it "the end of an era" last week when Yahoo's iconic retro-lit billboard (pictured above) came down from the spot where it had been overlooking San Francisco since 1999. The soon-to-be forgotten tagline reads, "A nice place to stay on the Internet."