'Complexity' Delays Microsoft-Yahoo Deal - InformationWeek
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10/29/2009
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'Complexity' Delays Microsoft-Yahoo Deal

Deadline for completion passes as the companies work out the fine print.

It's taking longer for Microsoft and Yahoo to hammer out the details of their Internet partnership than the companies originally thought it would. The tech giants previously said they would have the deal signed by Oct. 27, but that deadline came and went Tuesday without a formal partnership in place.

"Given the complex nature of the transaction, there remain some details to be finalized," Yahoo said in a filing Wednesday with the Securities and Exchange Commission.

"The parties are working diligently on finalizing the arrangements, have made good progress to date, and have agreed to execute the agreements as expeditiously as possible," Yahoo said. One possible sticking point may be the complex revenue sharing formula under which the companies will split search dollars.

Despite the delay, Yahoo CEO Carol Bartz assured analysts Wednesday that the deal would get done.

Microsoft and Yahoo unveiled their wide ranging search alliance on July 29, following months of on-again, off-again negotiations. The pact calls for Microsoft's Bing technology to power queries on all of Yahoo's Web properties, while Yahoo assumes broad sales responsibilities for its own, and Microsoft's, Internet platforms.

Microsoft's AdCenter platform will serve as a self-service search advertising tool for both companies. The deal does not extend to Internet display advertising. Yahoo, meanwhile, will continue to "own" the overall user experience on its search pages, though Bing will carry out the actual queries.

Microsoft will compensate Yahoo for traffic from Yahoo's sites under a revenue sharing formula under which Yahoo will retain 88% of the search revenue generated on its pages for the first five years of the deal.

Yahoo has said it expects the arrangement to add $500 million to annual operating income and $275 million to cash flow while cutting capital expenses by $200 million.

Investors shrugged off news of the delay, as shares of both Microsoft and Yahoo were flat in midday trading Thursday.

InformationWeek and Dr. Dobb's have published an in-depth report on how Web application development is moving to online platforms. Download the report here (registration required).

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