A search outsourcing deal with Microsoft could leave Yahoo with a little more cash in its wallet, potentially up to $1.3 billion more, according to a research report released Tuesday by Jefferies & Co.
With reports that Yahoo and Microsoft are holding preliminary talks to explore a search and display advertising partnership, Jefferies analyst Youssef Squali noted that such a deal could save the Internet search pioneer a tidy sum of money.
The parties could, for example, have Yahoo outsource its search infrastructure to Microsoft, and in turn, Microsoft would outsource its display advertising to Yahoo.
In his report, Squali noted:
Outsourcing the search infrastructure could bring Yahoo incremental savings of $1 billion to $1.3 billion. Finally, any upfront cash from Microsoft (as offered in July) could be deployed by Yahoo for either share buybacks or M&A.
Given the long-term importance of integrated search+display offering, however, we believe Yahoo would need to reserve the right to a) regain full control of its search assets in the future and b) maintain full access to search data in order to improve targeting of its display ads.
Meanwhile, if Microsoft where to split its display advertising revenues 50-50 with Yahoo, that could result in roughly $600 million to $800 million in incremental revenues to Yahoo. During the fourth quarter, Squali estimates Microsoft generated $300 million to $400 million in display advertising.
Yahoo is said to be wrapping up its search for a new chief executive, and a decision could come as early as next week, according to a report late Thursday in The Wall Street Journal, citing people close to the search pioneer.
Yahoo's board is reportedly leaning toward a candidate from outside the company, the newspaper reported. Carol Bartz, former chief executive officer of engineering software company Autodesk, is considered a candidate, the Journal reported.
From inside the company, Yahoo President Sue Decker is considered a strong candidate for the position, people familiar with executive search say. Decker has undergone two full rounds of in-depth interviews with Yahoo's board, according to sources.
At least one influential Microsoft source noted that Decker is well regarded at the software giant, even though the two companies weren't able to strike a full buyout deal or a partial one for just the search business.
For Yahoo, naming Decker as CEO could potentially bode well for its efforts to quickly reignite takeover talks with Microsoft, given that an outside hire would need time to analyze the various aspects of Yahoo's businesses before holding discussions to potentially sell off parts of the company.
Other outside candidates have reportedly included former Vodafone CEO Arun Sarin, whose expertise with the carrier could have come in handy in righting Yahoo's failed effort to win the Verizon search business. But Sarin is reportedly no longer interested in being Yahoo's CEO.
Yahoo announced on November 17 that co-founder and CEO Jerry Yang would step down and resume the role of chief Yahoo once a new CEO is selected. In the meantime, Yahoo is nearing its two-month mark in its search.
This post was updated at 1:39 p.m. PST with Yahoo declining to comment.
Yahoo may have fallen out of favor with Wall Street after the failed Microsoft buyout bid, but that doesn't mean you can count Yahoo President Sue Decker out of the running for CEO, people familiar with executive search say.
(Credit:
Yahoo)
Decker has undergone two full rounds of in-depth interviews with Yahoo's board, according to sources.
And, in executive recruiting circles, more than one in-depth interview with an internal candidate signals a strong contender, said David Nosal, CEO of executive recruiting firm Nosal Partners.
"If she has gone through two rounds of full interviews with the board, it sends the signal that she is being given strong consideration," Nosal said. "Rarely do boards go through a second round of full interviews, unless there is something significant they see there, whether it's for an internal or external candidate."
A number of industry players and major Yahoo investors had discounted Decker as a viable CEO candidate for the struggling Internet search pioneer, following Microsoft's failed buyout bid of $33 a share for the company. Yahoo, which had traded at roughly $19 a share before the initial bid became public last January, closed Wednesday at $12.71 a share.
But one source familiar with the search noted: "She has always been a strong candidate."
And at least one influential Microsoft source noted that Decker is well regarded at the software giant, even though the companies weren't able to strike a buyout, or partial deal for just the search business.
For Yahoo, naming Decker as CEO could potentially bode well for its efforts to quickly reignite talks with Microsoft, given that an outside hire would need time to analyze the different aspects of Yahoo's businesses before holding discussions to potentially sell off parts of the company.
Meanwhile, strong outside candidates have reportedly included former Vodafone CEO Arun Sarin, whose expertise with the carrier could have come in handy in righting Yahoo's failed effort to win the Verizon search business. Sarin is reportedly no longer interested in the Yahoo CEO gig.
And an All Things Digital post Wednesday notes Autodesk CEO Carol Bartz is another serious contender for the post.
Although sources familiar with the search say there is no deadline for naming a CEO and that it's hoped one could be selected by the end of the quarter, executive recruiters say there is an artificial deadline.
"A search of this magnitude you can never rush, but since it's one of the most high-profile CEO searches, there are any number of people who have made it be known in, or outside, the U.S. that they are interested in the job. I would imagine that Yahoo would be into its second or even third round of interviews with a short list of candidates," Nosal said.
He added he would be "surprised, if not disappointed," if Yahoo does not name a CEO within the next 30 to 45 days.
Executive recruiter Jon Holman of the Holman Group noted that if a CEO is not found within a four-month period after launching a search, the process "begins to grow hair."
"If six months go by, you know that the board has seen a bunch of people and you begin to think that the board doesn't know what it wants, or the board is looking for a Superman that doesn't exist, or no one wants the job," Holman said. "All those alternatives are bad. You don't want the company to look like damaged goods."
Yahoo announced on November 17 that its founder and CEO Jerry Yang would step down and resume the role of chief Yahoo once a new CEO was selected. In the meantime, Yahoo is nearing its two-month mark in its search.
Yahoo declined to comment on Decker and the CEO search.
- prev
- 1
- next
