Yahoo shares rise on Microsoft move
Microsoft seeks deal with Yahoo's online search business; doesn't rule out full-blown acquisition.
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| Microsoft CEO Steve Ballmer is eyeing a deal involving Yahoo's search business. |
Fortune (NEW YORK) -- Yahoo shares climbed slightly as Microsoft showed interest in a possible deal for the Internet giant's search advertising business.
Microsoft's renewed interest in Yahoo comes two weeks after it walked away from an offer to buy the company, insisting it was no longer interested in an acquisition after Yahoo CEO Jerry Yang rebuffed Microsoft's higher bid.
Now Microsoft (MSFT, Fortune 500) is eyeing a deal involving Yahoo online's advertising engine, and hasn't ruled out making another bid for the whole company. The possibility of a Microsoft offer comes days after Carl Icahn, the billionaire activist investor, and a group of large Yahoo shareholders pressured Yahoo to return to the negotiating table.
Microsoft has focused on Yahoo's search advertising business as the best way to counter Google's (GOOG, Fortune 500) dominance of the online ad industry. Yahoo and Google are discussing a partnership whereby Google would deliver ads next to Yahoo search results, giving Yahoo a fresh revenue stream. Reports that a Yahoo-Google deal is close come as Microsoft is due this week to reveal to advertisers its plan for catching up to Google.
Investors and analysts see Microsoft's renewed interest as a mildly positive sign, sending Yahoo shares up about 1.5%, to $28.08, early Monday. Microsoft shares were down slightly.
"Our view is that with [Microsoft's] recent announcement, it is just a matter of timing but some kind of Microsoft/Yahoo combination is imminent," Collins Stewart analyst Sandeep Aggarwal wrote in a research note Monday. Aggarwal puts a $21 billion price tag on Yahoo's search advertising business.
On Thursday, Icahn launched a proxy contest at Yahoo to try to force a Microsoft buyout. He nominated 10 candidates to replace Yahoo's board. Other hedge funds, including Paulson & Co., bought large stakes in Yahoo in the wake of Icahn's move last week.
Yahoo shares are now up 11% over the past week when Icahn, whose launched similar high profiles with Time Warner (TWX, Fortune 500), Motorola (MOT, Fortune 500) and other Fortune 500 companies, stepped in to try and force a deal with Microsoft. 
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