Exclusive: Microsoft considers bidding for Yahoo: sources
(Reuters) - Microsoft Corp is considering a bid for Yahoo Inc, resurfacing as a potential buyer after a bitter and unsuccessful fight to take over the Internet company in 2008, sources close to the situation said on Wednesday.
Context & Ripple Effects
This is round two of a long-running saga. Microsoft's interest in Yahoo dates back at least to the 2007 round of merger rumors, escalated into a full takeover fight in early 2008 that drew a rival News Corp. bid and a threat from Yahoo's board to align with Google against the proposal — before the pursuit collapsed. Reuters now reports, on sources, that Microsoft is considering returning as a buyer while multiple parties weigh bids for a company whose value is itself in question.
The report lands amid a busy week for Microsoft — the confirmed end of the Zune hardware line, the Mango update reaching half of Windows Phones, and Ballmer's pay raise in the annual proxy — and AllThingsD's same-day pickup was openly skeptical that a bid would actually materialize, so the story should be read as a considered option, not a done deal.
First-order effects
- Yahoo's board and advisers gain a named, cash-rich strategic bidder alongside the financial buyers already weighing offers, which raises the floor price in any auction process.
- For Microsoft, a deal would fold Yahoo's audience and display business into Bing and its advertising platform — the same scale logic that drove the 2008 approach.
Second-order effects
- Private-equity and other prospective bidders must now price Yahoo against a strategic acquirer that can justify paying for synergies they cannot, potentially crowding out or forcing consortium structures.
- Google faces the prospect of a consolidated Microsoft-Yahoo search and display competitor — the outcome Yahoo's board flirted with by courting Google back in 2008, now inverted.
Third-order effects
- If the pattern holds, second-tier web portals and search properties keep consolidating under the largest platforms, because standalone scale in search advertising has proven hard to sustain — a structural pressure visible across both the 2008 fight and this renewed consideration.
- Repeated multi-year pursuit of the same target also signals that mega-deals in consumer internet get revisited rather than abandoned, making earlier failed bids a live overhang on target valuations rather than closed chapters.
The trend: Search and portal assets are being pulled toward platform-scale consolidators, with Microsoft's recurring interest in Yahoo marking another data point in the slow concentration of web advertising around the biggest players.