Update: 29 July, 2009 @ 10:12 AM

Yahoo! and Microsoft have published simultaneous press releases which confirm that a deal between the one time rivals has been finalized.

A full list of the deal’s points are contained in the press releases, but we’ve boiled that list down into a selection of essentials:

• Microsoft will acquire an exclusive 10 year license to Yahoo!’s core search technologies, and Microsoft will have the ability to integrate Yahoo! search technologies into its existing Web search platforms.
• Bing will be the exclusive algorithmic search and paid search platform for Yahoo! sites.
• Yahoo! will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform.
• Each company will maintain its own separate display advertising business and sales force.
• Yahoo! will innovate and “own” the user experience on Yahoo! properties even though it will be powered by Microsoft technology.
• Microsoft will compensate Yahoo! through a revenue sharing agreement on traffic generated on Yahoo!’s network of both owned and operated (O&O) and affiliate sites.
• Microsoft will guarantee Yahoo!’s O&O revenue per search (RPS) in each country for the first 18 months following initial implementation in that country.

Original story: 29 July, 2009 @ 1:28 AM
A source close to the renewed negotiations between Microsoft Corp. and Yahoo! Inc. has confirmed that the dot com giants have struck an agreement that will be announced within 24 hours.

The terms of the alleged agreement upholds rumors of a revenue sharing model, while dashing gossip that Microsoft would foot an up-front payment of some $3 billion said the source, who wished to remain anonymous as the deal has not been announced.

Rumors of a renewed effort to unite Yahoo! and Microsoft against Google broke two weeks ago Friday when 24/7 Wall Street revealed that sources inside a major client of the investment firm ThinkEquity said that a deal was “imminent.” Secondary sources supported the rumors with reports that key Microsoft search execs were at the Yahoo! campus in Silicon Valley to hash out the “short strokes” of a deal.

With the short strokes apparently drying, the purported deal is also said to ink a Yahoo! switch to Bing search results and the adoption of Microsoft technology for advertising sales.

But as Reuters notes, a combination of the second and third largest search outfits will certainly trigger scrutiny, if not ire from antitrust regulators. Similarly, regulators may gut a key advantage to the deal by restricting Microsoft’s ability to share search data with its business partner — not acquisition — Yahoo! Inc.

Despite the potential for legal wrangling, shareholders have continued to see value in a Microsoft/Yahoo! agreement. ComScore’s June search statistics suggest that the two companies are merely trading blows for their respective shares, rather than growing the business by eroding Google. The stats reveal that Google held steady at 65 percent while a 0.5 percent drop in Yahoo! search coincides with the $100 million introduction of Bing. A deal that unites Yahoo! and Microsoft’s search divisions could do away with the share-exchanging wheel spinning and unite 30% of the market under one roof.

Both companies have predictably declined comment.

It seems fitting that almost one year after we published a detailed account of the dramatic history between Microsoft and Yahoo! that the rival web outfits may finally be close to an actual deal.

News of rekindled romance broke yesterday when 24/7 Wall Street revealed that sources inside a major client of the investment firm ThinkEquity said that a deal was “imminent.”

The alleged imminence of the deal has triggered a new round of speculation over the terms. Sources outside ThinkEquity’s sphere have suggested that Microsoft will deliver $3 billion up front and 110 percent of its net search revenues, declining to 90 percent after the third year.

This most recent endeavor to finally ink an agreement may be more than the incensed phone calls and posturing PR releases of old. Former WSJ business analyst Kara Swisher has reported that key Microsoft search execs are on the ground in Silicon Valley to spend a weekend with their old flame.

One source close to the situation said that the nuptials are “down to the short strokes.” They continued: “it is just a question if we can finally close this.”

Even in today’s tepid economic climate, there continues to be a business case for a Microsoft acquisition of Yahoo! ComScore’s June search statistics suggest that the two companies are trading blows for their respective shares, rather than growing the business by eroding Google. The stats reveal that Big G held steady at 65 percent while a 0.5 percent drop in Yahoo! search coincides with the $100 million introduction of Bing. A deal that unites Yahoo! and Microsoft’s search divisions could do away with the share-exchanging wheel spinning and unite 30% of the market under one roof.

For Yahoo!, Microsoft may simply be an inevitability. Even after ousting Yahoo! founder and Dear Leader Jerry Yang, issuing pink slips to some 1400 employees and raising former Autodesk exec Carol Bartz to the spot of chief exec, the overall outlook of the company has remained grim.

Year to date, a six month uptick in the value of Yahoo! stock seems fortuitous, but the upswing has yet to put the company back at $20 a share– a value that plunged to less than $11 over the span of four weeks between September and October of last year.

ComScore data also reveals that deep purple has lost a share of the search market every month since the start of the year.

Finally, while Google continues to expand the size and scope of its operation and Microsoft has refreshed its face with Bing, Yahoo! has seemed positively paralyzed in comparison. Efforts to enhance the admittedly clever YQL and BOSS initiatives don’t do a lick of good to bolster the company’s primary focus on public search and advertising.

In many ways, both companies are still struggling to recover from burdensome portfolios that became crushing in the wake of the .com bust. After diversifying into personals, automobiles, finance, auctions, shopping, sports, games and chat, the “portal to the web” model seemed quite the anachronism in light of the simplicity and transparency Google has offered users and investors.

You know it, we know it, and Microhoo knows it: Yahoo! and Microsoft are in dire need of a little simplicity, and a fat-trimming search merger would not only help to streamline, but help to instantly realize the market share aspirations neither company can realize alone.

New Yahoo! CEO Carol Bartz once asked bankers and pundits to give the company some “frigging breathing room.” Without this deal, she may as well have asked for gasping room instead.

Is it time for the revolution? No? Boring.

The perpetual dramastorm at Yahoo! continues with the recent announcement that the firm has selected Carol Bartz of Autodesk as the next CEO.

Though criticisms for having little to no web experience have already been leveld at her, Bartz has been quick to play hardball with pundits. “Let’s not put ourselves in some crazy timeline. Let’s give this company some frigging breathing room. Everybody on the outside deciding what Yahoo should or shouldn’t do–that’s going to stop,” she said during her first financial meeting.

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Just a short time ago we carried word that Yahoo! CEO Jerry Yang intended to step down after a suitable successor has been found. In light of the recent announcement, Yang has just posted a blog entry that serves as both a state of the union address and a glimmer of reason for the decision.

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It has been revealed that Yahoo! founder and CEO Jerry Yang will step down after a successor is found.

In a prepared statement, Yahoo! chairman Roy Bostock expressed that the decision had been jointly arrived upon. “Jerry and the board have had an ongoing dialog about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level,” he said.

Following the announcement, Yahoo! stock (NASDAQGS: YHOO) is up 15% and climbing with a $1.33 boost. This should start to relieve Yahoo! shareholders who have suffered crushing cuts in stock value throughout the course of 2008.

Yang is expected remain within Yahoo!’s ranks as the nebulously-titled “Chief Yahoo.”

After spending two years spurning Microsoft’s generous advances and, more recently, being rejected by Google, Yahoo! is falling on tremendously hard times. All snide comments about the skills of Yahoo! management aside, it seems the flagging search giant is turning back to Microsoft to save itself.

At a Web2.0 conference in San Francisco, Yahoo! founder and CEO Jerry Yang expressed interest in resuming talks with Microsoft while admitting that nothing was under way. Meanwhile, minority shareholder and recent board member Carl Icahn continues to suggest Yahoo! sell its search services to Redmond.

As the value of Yahoo! shares flirts with $14, it will be difficult to curry enough favor to land the $37 that Microsoft offered back in July.

At just $53.4 million, Yahoo!’s third quarter results are a far cry from last year’s $151 million. As a result of the 64% decrease, the once-mighty search giant is cutting 10% of its workforce.  As of June 30, Yahoo’s employee count was over 14,000.

Jerry Yang, Yahoo! co-founder and CEO cited economic concerns as the primary reason for loss, but remained optimistic about their future. “As economic conditions and online advertising softened in the third quarter, we remained highly focused on our 2008 strategy to invest in initiatives that enhance not only our long term competitiveness, but also our ability to deliver for users and advertisers in this more difficult climate,” he said.

After the recent hiring of layoff experts Bain & Co., it has been a matter of when, not if, employees would be shrugged from Yahoo! in another round of downsizing. It is expected that their Tuesday financial conference call will announce a reduction of between one thousand and three thousand employees.

Last Saturday Icrontic ran a comprehensive analysis of the tensions between Microsoft and Yahoo!. We noted then that Yahoo’s! annual board elections were fast approaching and have since come to pass. In a surprising conclusion, Yahoo!’s standing board of chairs has been reelected in full.

All current board members received a minimum of 78% support, with Yahoo! founder Jerry Yang receiving 85% endorsement. Roy Bostock, another board member instrumental in rejecting Microsoft, received 79% endorsement.

The board’s Director, Robert Kotick, netted an overwhelming 92.5% but resigned immediately at the conclusion of the meeting. He has been replaced by Carl Icahn, who now sits on the board to represent the minority interest in Microsoft’s ownership.

In the ruthless world of mega-corporate mergers, few events have been more drawn out or drama-filled than that between Microsoft (NASDAQGS: MSFT) and Yahoo! (NASDAQGS: YHOO). Our story begins in May of 2006 with an unconfirmed press report that Microsoft was considering purchasing a stake in Yahoo! in the first of many steps to stem the tide of Google. Such a merger was favorably looked upon, allowing Yahoo! to maintain its “buy” valuation with many stock analysts and securities firms. This came on the heels of an October 2005 announcement that Y! IM and MSN Messenger would be interoperable. Analysts and investors hoped that the momentum would carry, but talks had all but fizzled.

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