updated 12:45 am EDT, Thu June 26, 2008
Yahoo clarifies deals
Yahoo CEO Jerry Wang and Chairman Roy Bostock on Wednesday sent a letter to shareholders explaining the June 12th deal with Google, as well as clarifying its negotiations with Microsoft, who recently made a bid for the search and advertising giant. Yahoo writes that the "carefully structured" agreement with Google will add $250 to $450 million in incremental operating cash flow for the company during its first year of operation.
The deal has Yahoo providing algorithmic and sponsored search results as usual, in addition to ads from Google displaying alongside Yahoo search results. Cash flow from advertisers to Google, back to Yahoo will supposedly strike "the right strategic balance" by enhancing the company's financial results, while also helping it achieve a position as a common "starting point" for internet users. Yahoo hopes this approach will give the company a "must buy" for internet advertising from the point of view of prospective clients.
Yahoo assures investors that the deal compliments its overall revenue generation strategies that the company is already pursuing, and any subsequent deals with Microsoft or others would not be jeopardized. Yahoo did add, however, that the agreement with Google would add more shareholder value than the Microsoft search-only hybrid proposal.
After a number of meetings with Microsoft, Yahoo concluded that the software giant's proposal was inadequate, due to forfeiting a large amount of control over company operations, as well as insufficient profitability for the company and shareholders. Microsoft would maintain veto control over company actions, and would hold Yahoo to a 10-year arrangement where all search business would be dependant on the former company.
The note also addressed billionaire Carl Icahn's efforts to undermine the authority of the current Yahoo board. Yahoo simply addressed the matter, putting Icahn in a bad light, saying that Icahn – as well as any board put forward by the investor – would not care about the future of Yahoo itself once the deal had gone through. Yang and Bostock put it to investors whether they want a board who cares about the future of the company, or merely drones who will offer no beneficial agenda.