Wednesday, July 29, 2009

Yahoo In Deal With Microsoft On Search Technology

Sunnyvale-based Yahoo and software giant Microsoft said early this morning that the two are banding together to challenge Google for the web search market. In a major deal, Yahoo and Microsoft said that Yahoo will take over the web search technology efforts for Yahoo, providing the web search technology that powers Microsoft Bing as the back end of Yahoo's search tools on its various web sites. In a surprise announcement, the two said the agreement between the companies will last for 10 years, with Microsoft and Yahoo in a revenue sharing agreement. Microsoft will pay Yahoo 88 percent of the search revenue generated on Yahoo sites for the first five years, and will also guarantee a certain revenue per search to Yahoo. In turn, Yahoo takes over the premium search advertising efforts for both companies. Yahoo said it expects to save $500M in operating income and capital expenditures of approximately $200M by handing over the search aspects to Microsoft, saving approximately $275M in annual operating cash flow.