As finalization of a Microsoft-Yahoo search deal reportedly nears, activist investor Carl Icahn--who played a key role in trying to broker a broader partnership between the companies last year--is speaking out in favor of such an agreement.
"I've been a strong advocate of getting a search deal done with Microsoft," Icahn, who owns about 5 percent of Yahoo and sits on its board, told Reuters in a phone interview Friday. "It would enhance value if a deal got done, because of the synergies involved."
According to an All Things Digital report late Thursday, several top Microsoft players--including online executives Yusuf Mehdi, Satya Nadella, and Qi Lu--are in Silicon Valley to try to finalize a search deal with Yahoo.
The report says the two sides are "down to the short strokes" after years of closely watched on-again, off-again talks. A deal could come within a week, All Things Digital said.
Icahn, for his part, wouldn't comment on where the latest supposed negotiations between Yahoo and Microsoft stand, according to Reuters. Icahn was a central figure in Microsoft's highly scrutinized $47.5 billion takeover bid for Yahoo, which fell apart last November.
During the negotiations, he launched a proxy fight in a bid to take over Yahoo's board. Among his wishes was that then-CEO Jerry Yang step down. The company and Icahn eventually reached an agreement that got him a seat on the board, and the number of seats was expanded, with Yahoo appointing two new members from Icahn's slate of candidates.
Since the full-out acquisition fell through, both Microsoft CEO Steve Ballmer and current Yahoo CEO Carol Bartz have indicated they are open to some sort of a search deal.
As my CNET News colleague Ina Fried pointed out, with Microsoft's Bing getting some good reviews and Microsoft having billions in cash on hand, the pieces would seem to be in place if both sides have the will to make it happen.
Microsoft on Monday announced a new stock buyback program of up to $40 billion, sending its stock up more than 5 percent in premarket trading.
The software giant said it would repurchase up to $40 billion worth of its shares through September 2013. It recently completed a previous $40 billion buyback program.
Investors, who tend to cheer stock buyback programs because it makes existing shares in the market more valuable, pushed Microsoft's stock to $26.50 a share in premarket trading, up 5.33 percent.
Microsoft has seen its shares lose roughly 22 percent of their value since it
PC maker Hewlett-Packard also announced a stock buyback program Monday, authorizing up to $8 billion in shares to be repurchased.
The Redmond, Wash.-based company, meanwhile, also announced plans to pay a 13-cent quarterly dividend, which is an 18 percent increase over its previous quarterly dividend. The dividend will be payable on December 11 to shareholders of record as of November 20.
In addition to the stock buyback program and increased quarterly dividend, Microsoft is also planning to float out corporate debt of up to $6 billion. The proceeds from the debt offerings will be used for general corporate purposes, stock repurchases, and working capital.
Yahoo has reached a settlement with activist investor Carl Icahn, who will join the Internet company's board.
Icahn, who had proposed his own slate of board members, was agitating for the company to reach a deal to sell all or part of the company to Microsoft. Icahn and Microsoft officials had previously stated that they could not work with the existing Yahoo board.
As part of the settlement, Icahn, who owns about 68.7 million shares, or 4.98 percent of Yahoo common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo shares in support of the board's nominees. Board member Robert Kotick will not seek re-election.
Eight members of Yahoo's current board of directors will stand for re-election at the scheduled shareholder meeting next month: Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson, and Jerry Yang.
The board will expand to 11 members, adding Icahn and two other nominees from Icahn's slate.
It was not immediately clear whether the board would continue negotiations with Microsoft.
"While I continue to believe that the sale of the whole company or the sale of its search business in the right transaction must be given full consideration, I share the view that Yahoo's valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders," Icahn said in a release. "I believe this is a good outcome and that we will have a strong working relationship, going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."
Yahoo is closer to outsourcing its core ad search business to Google, after favorable testing of Google's advertisements on its search pages, according to a report in The Wall Street Journal.
The WSJ cited people familiar with the matter who said that a deal between Yahoo and Google is increasingly likely given the status of the testing. The report also notes that such an outsourcing deal could give Yahoo a boost in its efforts to spur Microsoft into increasing its unsolicited buyout bid for the Internet search pioneer.
Yahoo may need such help if Microsoft is concerned about the additional costs it may have to bear to retain Yahoo employees.
A report in the New York Times noted "the hidden cost of 'flight insurance' against employee defections may also be a reason Microsoft has resisted raising its bid."
The Times report, citing sources, noted Microsoft not only paid $800 million to acquire Tellme Networks but spent an additional $100 million on employee retention perks--or an average of $300,000 per employees for the 330-member workforce.
One potential take-away from the Wall Street Journal and New York Times stories is negotiations between Yahoo and Microsoft may be hitting a rough patch, after media reports surfaced last Friday suggesting the two companies may try negotiating again this week.
That reported truce arose following rapid-fire reports last week of potential additional buyers hovering nearby. The often-reported Time Warner-AOL suitor may find traction in teaming up with Google to enter into a Yahoo deal, while speculation surfaced that Microsoft and News Corp. are toying with the notion of potentially making a joint bid for Yahoo.
Last week, Yahoo announced it would begin a limited test of using Google to deliver some search advertising. Microsoft immediately came back with a stern warning that such a partnership would hurt competition.
And while the Journal report notes that some view a Yahoo-Google outsourcing agreement, beyond the two-week test, as "mere gamesmanship" given potential antitrust issues it could pose, it may, nonetheless, seem a valid alternative to those weighing their options at Yahoo.
The Internet search pioneer has run both a Microsoft buyout scenario and a Google outsourcing deal through its antitrust viewfinder, according to sources who spoke with CNET News.com.
Yahoo, meanwhile, has invested millions of dollars in its own search technology, called Panama, so a partnership with Google would be a serious departure from its previous efforts--though it would not necessarily mean that the Internet company is completely killing off its entire ad infrastructure.
And, in the Journal report, it cites sources as saying that even if Yahoo pursued an outsourcing partnership with Google, it would not necessarily nix a Microsoft deal. The report notes Yahoo, for example, could step away from its Google fling, should it hitch up with Microsoft.
News.com's Desiree Everts contributed to this report.
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