Yahoo, Google set deal on ads
SAN FRANCISCO - Microsoft Corp.'s four-month-long courtship of Yahoo Inc. has finally thrown Yahoo into the arms of their biggest common rival, Google Inc.
Google and Yahoo said yesterday that they had reached an agreement under which Google would deliver ads next to some of Yahoo's search results and on some of its websites in the United States and Canada.
The nonexclusive deal is aimed at giving a lift to Yahoo's finances, and the company said it would generate an additional $250 million to $450 million in operating cash flow in the first year.
The agreement will also strengthen Google's dominance over the lucrative search advertising market. It was signed after Yahoo rejected a proposal by Microsoft to acquire Yahoo's search business and a minority stake in the company. The rejection seems to end months of negotiations.
"Clearly, it is time to move on," Jerry Yang, Yahoo's chief executive, said in a conference call. "This agreement with Google helps us to do so," Yang added, saying that the deal would allow Yahoo to continue to compete in its two main lines of business, search and display advertising.
Wall Street was less confident, sending Yahoo's shares down more than 10 percent, to close at $23.52, after the announcement that there would be no deal with Microsoft - not for the $47.5 billion it initially bid for all of Yahoo, or a smaller deal for any part of it.
The deal is certain to draw scrutiny from antitrust regulators, and the companies have agreed to delay it for three and a half months to give the Justice Department time to review it. Herb Kohl, Democrat of Wisconsin, the chairman of the Senate antitrust subcommittee, said his panel would closely examine the venture.
The deal is also likely to become fodder in the heated battle between Carl C. Icahn, the activist investor, and Yahoo for control of the company. Icahn has said that if Microsoft could not be persuaded to renew its bid for all of Yahoo, he would push for Yahoo to complete a search advertising deal with Google. He did not return calls seeking comment yesterday. .
In a statement, Microsoft said that its offer to buy Yahoo's search business was still valid.
