On Sunday, the Times of London reported that Microsoft had renewed talks with failing Internet giant Yahoo! and would manage its search engine for 10 years, while Yahoo! would retain control of its email, messaging, and content services. This report, which valued the deal at $20 billion, was later dismissed by representatives of both companies, however.
"We don't comment on rumors, and all this is a rumor," a Yahoo! spokesperson said Sunday.
So what gives? Why would such a prominent publication report such a transaction if it's not happening? And why would it be so specific? According to the Times, Microsoft, Yahoo!, and AOL are involved in a complex three-way transaction. Microsoft would get Yahoo!'s search business, and AOL would presumably merge with Yahoo! and take control of the management of that company.
My guess is that the Times simply rolled the dice. Many do expect Microsoft to pull the trigger on a less expansive--and less expensive--deal than the $33-per-share offer it made early this year. Microsoft executives have hinted that they are still interested in some deal around Yahoo!'s search business. And many industry analysts believe that the time is right for such a deal, given Yahoo!'s rough year and declining stock price.
Ergo, Microsoft and Yahoo! simply must be talking. Right?
Wrong.
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