With Suitors Lining Up, Yahoo! Wavers on Sale of Company

Like the soap opera that it has become, beleaguered online giant Yahoo! has descended into drama this week as it sizes up the various offers for the company and its diverse assets. But now that it's finally standing at the altar and awaiting a suitor, Yahoo! is apparently having second thoughts. And maybe selling itself outright isn't the best course of action after all.

All the hand wringing is apparently having a positive effect on the various groups of companies that are interested in poaching Yahoo! while it's down. Yahoo!'s stock price jumped to as high as $17 early this week as rumors of various offers for the company were reported online. Apparently, Alibaba has teamed with Blackstone Group and Bain Capital and offered the company $20 a share for a full sale. (Note that even at this elevated price, Yahoo!'s value is roughly half of the $44.6 billion that Microsoft offered for the company back in 2008.)

One option Yahoo!'s board of directors is considering is selling a minority stake in the company rather than putting the entire company up for sale. And this option is apparently tied to two other bids for parts of the company, from groups tied to TPG Capital and Silver Lake, respectively, which could net Yahoo! roughly $17 a share. That investment could allow Yahoo! to continue, though it raises the specter of a later takeover if various groups were to acquire a majority stake in the company over time.

That Silver Lake group, by the way, includes Microsoft and, in a weird twist, Netscape cofounder Marc Andreessen, who's been busy playing the venture capitalist game since his company was sunk by the software giant over a decade ago. The Silver Lake group proposes selling off Yahoo!'s Asian holdings—which includes Alibaba—replacing three board members (one with Andreessen), and a hiring a new CEO.

So, why would Microsoft want just part ownership in Yahoo!? Microsoft hasn't even publicly acknowledged its exact interest in Yahoo!, though the company did disclose last week that it had signed a non-disclosure agreement gaining it access to a deeper look at Yahoo!'s financial records. But it's not hard to speculate why the software giant is interested in a partial sale rather than the whole company. Yahoo! is a train wreck in many ways and would require a lot of time and energy to fix—time and energy that Microsoft is better off spending on more pressing core matters such as its next Windows and Office versions, and various cloud computing efforts.

But a partial stake in Yahoo! would help Microsoft ensure that its vital search partnership with Yahoo! remains in place. This partnership is responsible for the majority of Microsoft's search-engine gains with Bing, and if Yahoo! were sold to another group without Microsoft influence, it's possible that the new management would seek a partnership with Google, eliminating most of Bing's market potency.

Stay tuned for the continuing drama of "As the Yahoo! Turns."

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