Microsoft and Yahoo reconsider merger

Cory Bergman May 4th, 2007

A year ago the two companies were considering a merger, but nothing came of it. Now they’re back at it, reports NY Post and the WSJ, with Microsoft possibly looking to acquire Yahoo (see update below). Some analysts say, though, the most likely deal scenario would focus only on online advertising and not an outright acquisition due to the heavy overlap in MSN-Yahoo services. Sources say that Microsoft is growing more concerned about its poor performance in online advertising, especially after losing Doubleclick in the bidding to Google. “The minute you hear Microsoft start arguing against something on antitrust grounds, you know they are desperate and need to do something big,” said one source. A combined Microsoft-Yahoo would equal a 27 percent share of paid search dollars compared to Google’s 65 percent. And it would get them within 13 percent of Google in overall online ad sales. Stay tuned…

Update: Yahoo stock closed up 10 percent.

Update: Wall Street Journal reports merger talks are “no longer active” but the two companies are still talking about ways to cooperate with each other.