Yahoo in precarious position as CEO beckons Microsoft

Analysts mixed on whether the end of its Google deal sounds the death knell for Yahoo

Just a day after Google walked away from a proposed search advertising partnership with Yahoo, the latter firm's CEO said a takeover by Microsoft would now be the best thing for his company.

Some industry observers maintain that Google's decision to walk away from the proposed deal could be the death knell for Yahoo, forcing it into the arms of Microsoft or another company like AOL. CEO Jerry Yang may think so too, as he said yesterday that the company is now willing to negotiate a sale price that's below the figure Microsoft rejected during negotiations earlier this year.

Mike Masnick, president and CEO of IT research firm Techdirt, said in a blog post that the loss of the deal with Google could represent a big blow to Yahoo's chances of operating as an independent company.

"The company was very much relying on the Google deal to stabilize its financial condition," Masnick said. "Without that, Yahoo is in trouble -- meaning there's probably a good chance that Microsoft takes another look at acquiring the company for much, much less than before. That means, Yahoo as we know it, disappears."

Stan Schroeder, a blogger at Mashable, noted that Google's move sets the stage for a new chapter in the Microsoft/Google/Yahoo saga.

"Yahoo definitely pulled the shortest straw here; Microsoft may be a winner, but whether they're capable of doing something useful with a giant such as Yahoo remains questionable," he added. "The real winner is, once again, Google, who interfered just enough to weaken both Microsoft and Yahoo as much as possible with virtually no downsides. Well played."

Others observers, however, asserted that Yahoo is salvageable as a standalone company despite the killing of the proposed Google deal. David Card, principal analyst at Forrester Research, noted that Yahoo has a large, and loyal, online audience. "They have done a pretty good job of selling advertising against that audience," Card said.

The Forrester analyst said he has never felt that Yahoo must become more competitive in the search business to survive. "I don't think they need to be that competitive in search to be a successful online media company," Card added.

None of the other big Internet portals - specifically AOL and Microsoft - has managed to be successful in social networking, mobile or online video, which are all keys to success in the online media business, Card noted. "Yahoo is pretty strong in all those potential growth areas except for social media," he added.

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Heather Havenstein

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