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Microsoft still searching for Yahoo

Yahoo sign at the 3GSM telecoms industry trade show in Barcelona on Feb. 11, 2008.

TEXT OF STORY

Bob Moon: There's yet another chapter in what's beginning to look like an eternal corporate love triangle: Seems Microsoft just can't get past it's obsession with Yahoo's search business, at least according to The Wall Street Journal.

It reports Microsoft is looking to team up with News Corp. or Time Warner to buy Yahoo. They would then bust up the company with Microsoft keeping the search business.

Of course, there's that engagement Yahoo has already made with Google to share ad revenue from online searches, but today, the Justice Department said it's going to take a closer look at that match-up.

Marketplace's Stacey Vanek-Smith has been searching for some answers on just what these companies are looking for.


Stacey Vanek-Smith: Earlier this year, Microsoft made a very generous proposal to Yahoo -- nearly $48 billion -- and Yahoo gave its answer:

[From "Say Anything"] Diane: Let's not start putting things on this level.

Lloyd: What? This is a good level.

Diane: I think that we should spend some time apart.

Microsoft, Yahoo's just not that into you.

But Henry Blodget with Silicon Alley Insider says there's a reason Microsoft can't walk away: It needs Yahoo's search business to stave off Google.

Henry Blodget: Search has definitely emerged as a business that is every bit as powerful and profitable as Microsoft's Windows monopoly. I do think the company is at a crossroads here that could ultimately destroy it if it doesn't make the transition.

And Microsoft could cash in big if it does. Online advertising is worth about $65 billion right now and growing rapidly. Search accounts for roughly half of that and at this late point in the game, Microsoft has to buy rather than build its way into the business, says Ken Wilbur with USC's Marshall School of Business.

Ken Wilbur: I think it's one of the only shots they have. Once advertisers and consumers form habits with search engines, it's very tough to get them to switch, especially when the products are as good as those currently offered by Google and Yahoo.

Wilbur says Microsoft may get its way. Google's proposed deal with Yahoo is being looked at by the Justice Department because of antitrust issues and many Yahoo shareholders would like to see Microsoft move in.

Microsoft won't be able to stay single forever. Wilbur points out that Google has rolled out free word processing and spreadsheet applications, a direct challenge to Microsoft's bread and butter software business.

I'm Stacey Vanek-Smith for Marketplace.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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