By Anders Bylund | Published: February 14, 2008 – 11:40AM CT
The Wall Street Journal is reporting (subscription) on Yahoo and News Corp.’s exchange of love notes (“Do you like me? [ ] Yes [ ] No”), in which the deal would entail spinning out Murdoch’s Web assets like MySpace, AmericanIdol.com, and PhotoBucket and send a few billion dollars in cash on the side. In return, the company and an as-yet anonymous private equity investor would own about 20 percent of the new Yahoo, and the cash component would value that company at about $50 billion.
The deal itself makes plenty of sense. News Corp would unload those Web properties, which really don’t fall within the company’s circle of expertise. Yahoo gets a value boost that could put its price tag out of reach for Microsoft, and it gets to incorporate valuable properties like MySpace into its operations. Just think of the cross-promotion opportunities between the world’s largest social network and the rest of Yahoo—without having to haggle over profit splits.
Of course, this could simply be a bid-boosting tactic from Yahoo, to squeeze as much cash as possible out of Microsoft. Bill Miller of Legg Mason, which is one of Yahoo’s largest shareholders, certainly thinks so. He’s looking for more than $40 per share, or a $55 billion total price tag. If a News Corp. deal can’t provide that boost, I don’t quite know what else will.
Yahoo CEO Jerry Yang sent out an all-hands e-mail to let his Yahoos know why the current Microsoft bid wasn’t good enough, which basically boils down to “we have a plan, and Microsoft won’t help us execute it.” It reads like a rehash of Yahoo’s publicly announced plans and strategies over the last few months, with some hand-wringing over the deal’s valuation. Maybe Microsoft gets in bed with Yahoo and maybe it won’t. But even if the deal happens, the Redmonds will still end up with a shell of the real Yahoo. The exodus of high-powered, high-value managers has already started.