Yahoo signs deal with Google after Microsoft talks end

June 13th, 2008 - 10:41 am ICT by IANS  

San Francisco, June 13 (DPA) Yahoo has entered an agreement to run some Google’s ads on its search pages after acquisition talks with Microsoft ended in failure, the web pioneer has said. The deal reached Thursday may add $800 million a year to Yahoo’s sales, but the companies will delay implementation till October to give the US Justice Department time for review, Yahoo said.

“The agreement enables Yahoo to run ads supplied by Google alongside Yahoo’s search results and on some of its web properties in the US and Canada,” said Yahoo. “The agreement will enhance Yahoo’s ability to achieve its goal to grow operating cash flow significantly.”

Announcement of the Google deal came after Yahoo disclosed that Microsoft had officially ended talks aimed at securing an acquisition agreement with it. Microsoft withdrew its $47.5-billion takeover bid early last month, but the companies continued talks about a partial acquisition in which Microsoft would buy Yahoo’s share business and a take a position in what remained of the company.

Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo, even at the price range it had previously suggested, the search portal said.

“With respect to an acquisition of Yahoo’s search business alone that Microsoft had proposed, Yahoo’s Board of Directors has determined, after careful evaluation, that such a transaction would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo stockholders,” the statement said.

The announcements sent Yahoo shares down some 10 percent as investors discounted a premium in Yahoo’s stock price predicated on a Microsoft purchase for as much as $35 a share. Yahoo shares were trading at $23.52 Wednesday evening, while Microsoft rose over 4 percent to $28.24.

Under the terms of its agreement with Google, Yahoo will pit that company’s ads against its own in an online auction for ads generated when users input certain search terms on the company’s websites. Yahoo said it expected first year revenues to jump between $250 million to $400 million.

The move comes as Yahoo is facing a shareholder revolt led by billionaire corporate raider Carl Icahn, who is trying to oust the current board whom he accuses of sabotaging the Microsoft takeover bid.

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