Friday, July 17, 2009

Is A MicroHoo Deal Imminent?

Telecommunications analysts at Stifel Nicolaus on Friday said an advertising and search deal between Microsoft and Yahoo would get a close look from the Justice Department and probably the European Union's antitrust authorities. Sources at the two high-tech companies said an agreement in imminent and could be announced as soon as next week. The All Things Digital blog reported that top Microsoft executives traveled Thursday to Silicon Valley to smooth out technical issues and said Microsoft CEO Steve Ballmer is reportedly deeply involved with the talks.

"We have always viewed a Yahoo deal with Microsoft as less risky, from the standpoint of antitrust review, than a deal with Google," Stifel Nicolaus analysts said in an e-mail. Google last year eventually backed off its efforts to do a search transaction with Yahoo in the face of resistance from the DOJ and criticism from Capitol Hill. There are several elements of a Yahoo-Microsoft deal that pose risk, the analysts said. The antitrust review would depend on the precise terms of the deal, which could take the form of a Microsoft acquisition of all of Yahoo, or, more likely, could be another run at some type partnership, they said.

Tech watchdog Jeff Chester warned the companies would not get a free pass from privacy and consumer groups even if the pairing would provide much needed competition to Google. Microsoft and Yahoo have created elaborate data collection services across platforms and applications and they have competing ad targeting businesses in search, display and mobile, he said. "Microsoft and Yahoo should expect privacy and consumer groups to vigorously press regulators to closely and skeptically examine the deal -- and at the very least impose a series of tough conditions on data collection practices," he said.