Google and Yahoo strike deal, Microsoft's out

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Editor’s Note: The following PC World article is reprinted from the Erik Larkin on the Web blog at the PCW Business Center.

Microsoft must be ticked. It didn’t get to buy Yahoo, or even just a slice of it. Instead, all its efforts only served to drive Yahoo into Google’s waiting arms.

The Google/Yahoo deal, announced Thursday, doesn’t make a Goohoo (or would it be Yagle?) by any means. According to BusinessWeek, Yahoo will display some Google text ads for Yahoo search results. Yahoo will control when and how the ads show up, and says it stands to make up to $800 million from the deal.

It seems clear Yahoo will need to take further steps to get its house in order, but just what those steps might be is still up in the air. Also in question is what Carl Icahn will do now that Microsoft appears finished (again) with its attempts to bolster its own lackluster online offerings with a Yahoo purchase.

Icahn may still try to replace Yahoo’s board come August, but as his primary goal for the proxy battle was to push a Microsoft deal, it’s unclear if there would still be any point to such a move. The Wall Street Journal has him “studying the situation” but not giving any clues about where he’ll go.

Don’t assume anything is a done deal in this saga, though. According to the Silicon Alley Insider, there’s an escape clause in the search deal that allows Google to walk away if there’s a ‘change in control’ for Yahoo. Per the piece, that could mean Microsoft, News Corp., or Time Warner buying 35 percent of Yahoo’s voting stock, Microsoft picking up 5 percent of total equity, or other triggers. Looks like Google would get a $250 million parting gift from the purchasing company if that happens.

And then there’s the potential for government regulators to put the kibosh on the plan. BusinessWeek has Eric Schmidt arguing that the deal doesn’t require regulatory approval, but guesses that Microsoft will still push for close scrutiny.

This story, "Google and Yahoo strike deal, Microsoft's out" was originally published by PCWorld.

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