Internet search engine Yahoo! Inc. (YHOO) Friday said that it has finalized and executed the online search and advertising deal with software giant Microsoft Corp. (MSFT). The companies expect to close the transaction in early 2010.
In a joint statement, the companies said, "Microsoft and Yahoo! believe that this deal will create a sustainable and more compelling alternative in search that can provide consumers, advertisers and publishers real choice, better value, and more innovation."
In end July, Microsoft and Yahoo announced forming a search pact, bringing the rivals together in a ten-year deal pitching them directly into battle against Google Inc. (GOOG) in the search market share.
There have been talks between the two companies about a possible partnership after Yahoo thwarted a takeover bid from Microsoft last year and Google terminated a search advertising deal with Yahoo amid regulatory concern.
Microsoft withdrew its $47.5 billion offer to buy Yahoo in May 2008 after Yahoo's board rejected the offer saying the price was too low.
Both Microsoft and Yahoo are trying their level best to gain online search market share from undisputed leader Google.
According to the Microsoft-Yahoo deal, Bing will be the default search engine search provider on Yahoo's websites, while Yahoo will handle worldwide sales for both companies' premium search advertisers.
Microsoft will acquire an exclusive 10-year license to Yahoo's core search technologies through the deal, and integrate them into its existing web search platforms.
Based on traffic generated on Yahoo's network of both owned and operated, and affiliate sites, Microsoft will compensate Yahoo's traffic acquisition costs through at an initial rate of 88% of search revenue generated on Yahoo's sites during the first five years of the deal.
Yahoo anticipates the search deal to result in annual GAAP operating income of about $500 million and capital expenditure savings of about $200 million, following complete implementation of the terms of the deal.
Microsoft and Yahoo have garnered support for this deal from marketers, who say that the two companies together will pose a more significant challenge to Google than either company does separately. Advertisers are keen to see the might of Google challenged, even if it means reducing the field of competitors to two.
Just hours after the deal was announced, antitrust issues were already cropping up, the industry giants said. In September, the sources said that the U.S. Justice Department asked the agency regulators to closely examine the Microsoft and Yahoo search pact.
However, the two companies still expect to close the transaction in early 2010, as previously scheduled.
Yahoo closed Friday's regular trading session at $15.19, up 8 cents on a volume of 17.48 million shares. In the after-hours, the shares further gained 3 cents.
Microsoft ended Friday's regular trading session at $29.98, up 15 cents on a volume of 58.81 million shares. In the after-hours, the shares lost 2 cents.
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