NEW YORK: Microsoft Corp is considering a bid for Yahoo Inc, resurfacing as a potential buyer after a bitter and unsuccessful fight to take over the Internet company in 2008, Reuters reported sources close to the situation as saying on Wednesday.Microsoft joins a host of other companies looking at Yahoo, which has a market value of about $20 billion and is readying financial pitch books for potential buyers, they said.
Those companies include buyout shops Providence Equity Partners, Hellman & Friedman and Silver Lake Partners, as well as Chinese e-commerce giant Alibaba and Russian technology investment firm DST Global, the sources said.
Yahoo shares jumped 10.1 percent on the news to close at $15.92 on Nasdaq, but fell back to $15.34 in after-hours trading. Microsoft shares ended 2.2 percent higher at $25.89.
Microsoft may seek a partner to go after Yahoo, one of the sources said, without identifying any parties.
No decision has been made and a bid may not materialize as there are internal divisions at the software company on whether it should pursue Yahoo again, a high-ranking Microsoft executive said.
Yahoo, Microsoft and the other potential buyers declined to comment.
One Wall Street analyst recently valued Yahoo at just over $20 billion, with its core search and display advertising business worth $7.7 billion, its Asian assets worth $9.2 billion, plus $3.2 billion in cash.
Yahoo owns about 40 percent of Alibaba as well as about 35 percent of Yahoo Japan.
If Microsoft fully combined its Bing Internet search business with Yahoo’s, it would give it more than 30 percent of the US search market and make it a credible competitor to Google, said Sid Parakh, analyst at fund firm McAdams Wright Ragen.
Under a 10-year deal struck in 2009, Microsoft’s Bing already powers Yahoo search, but it cedes 88 percent of resulting advertising revenue back to Yahoo.
Microsoft, with a cash pile of $53 billion, could certainly afford a deal, but some doubted the world’s largest software company would actually pursue it, given its previously failed bid and the existing Yahoo agreement.
“I think it’s unlikely because they (Microsoft) have been down this path before,” said Ben Schachter, an analyst with Macquarie Research.
Silicon Valley sources said Jack Ma, the founder and CEO of Chinese e-commerce giant Alibaba — who last month expressed interest in buying Yahoo — could team up with private equity to make a deal.
Or it may make more sense for Ma to team up with Microsoft, said Susquehanna Financial Group analyst Herman Leung.
“If Microsoft gets involved, then you don’t need private equity,” said Leung. “The problem for Jack Ma is capital. Microsoft has $53 billion in cash. Why have to deal with bondholders and all this stuff when Microsoft can make that all happen for you?”
Microsoft is making slow progress in combating Google’s dominance in search advertising. According to the latest figures from research firm comScore, Google has 64.8 percent of the US search market, Yahoo has 16.3 pct and Microsoft 14.7 percent.
But even with traffic from Yahoo, Microsoft still has not attracted enough advertising dollars and profitability in search is a long way off.
Last quarter, Microsoft’s online services unit — which includes Bing and the MSN web portal — lost $728 million. It has lost almost $6.5 billion over last three fiscal years.