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Yahoo & Microsoft Reportedly Close to Now-or-Never Deal

If the companies don't emerge with an agreement this time, they're reportedly unlikely to try again

A search and online advertising deal between Yahoo and Microsoft is imminent - unless of course it's blown off course again, according to Yahoo know-it-all All Things Digital, the Dow Jones blog.

Under the circumstances blogger Kara Swisher isn't guaranteeing a deal will happen though she hears one could be announced this week.

If the companies don't emerge with an agreement this time, they're reportedly unlikely to try again.

In its latest structure, which sounds very much like other passed-over proposals, Microsoft would take over Yahoo's search business, paying Yahoo a few billion dollars upfront and guaranteeing it certain payments over time.



There's reportedly a display ad element to the deal that Swisher thinks will have Yahoo taking the lead in selling premium ads.

So far it doesn't sound that much different from the one Yahoo would have done with Google to distance itself from Microsoft if the Justice Department didn't threaten to sue Google for antitrust if they did.

24/7 Wall Street thinks Yahoo will get $3 billion upfront and 110% of the revenue its searches fetch after traffic acquisition costs during the first two years. In the third year that figure would drop to 90%. Such an arrangement would also lower Yahoo's costs.

The Financial Times Friday claimed the money was still being negotiated.

It's been almost 18 months since Microsoft made its first public, and ultimately rejected, bid for Yahoo. The chase that followed ultimately cost Yahoo founder Jerry Yang his job as CEO, a job he was bad anyway, and brought in the administration of outsider Carol Bartz, who is currently recuperating from knee-replacement surgery.

And it cost Microsoft CEO Steve Ballmer his taste for acquiring Yahoo after Yang rejected his sweetened $47.5 billion offer a year ago May. Ballmer's been proposing some kind of alternate Google-opposing alliance between the two companies instead for over a year. So far it's been impossible to get a deal to stick.

Alone neither of the companies can give Google much competition, even with Microsoft's heavily promoted and promising new search engine Bing.

According to comScore, Google controlled 65% of the market in June to Yahoo's 19.5%, down 0.5%, and Microsoft's 8.4%, up 0.4%.

The market's initial reaction to Bing, supported by a $100 million ad campaign, may have helped persuade Yahoo that Microsoft stands at least a chance of going up against Google.

The Financial Times says it was looking for some kind of assurance. It also wanted continued access to the search behavior data to track user preferences.

Yahoo is supposed to report its quarter on Tuesday and Microsoft on Thursday after Google turned in mediocre results last week. Google said big advertisers were coming back after pulling in their horns because of the downturn.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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