Sources at a major client of investment house ThinkEquity say that the firm considers a Microsoft (MSFT) link-up with Yahoo! (YHOO) in the search business to be “imminent”. The comments were made by analyst William Morrison. ThinkEquity did not have an immediate comment.
Sources beyond ThinkEquity speculate that under the terms of the arrangement, Yahoo! will be paid $3 billion upfront and will get 11o% of the revenue that its searches provide after traffic acquisition costs in each of the first two years. In the third year, that figure would go to 90%.
If Microsoft can finally closed the transaction, it will, for a relatively modest sum, have wrapped up 30% of the US search market, giving its new Bing product a chance to thrive. Bing has picked up modest market share since its launch, but many analysts believe that after its $100 million marketing campaign is over, that share will be largely lost.
comScore put Google’s US June search share flat at 65%, Yahoo! at 19.5%, down .5%, and Microsoft at 8.4%, up .4%.
For Yahoo!, the transaction would give it the opportunity to lock in a substantial revenue stream from search and potentially save several hundred million dollars over the next three years by cutting development personnel and costs.
If the transaction materializes, Yahoo!’s share could jump $4 or $5.
Douglas A. McIntyre
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