Is Yahoo vulnerable to takeover?

In the first of an occasional series looking at big names that could be taken over, Simon Brew questions whether one of the oldest, most recognisable names in cyberspace may be about to change hands.

By Simon Brew, 20 Jun 2007 at 12:58

gallery

Another interesting theory that's gather moss at some speed is that Rupert Murdoch's News Corporation is circling Yahoo. This too has clear strategic advantages. Murdoch already owns the web's premier social networking site, MySpace, and this - according to some - could be leverage in any possible deal. It's speculated quite heavily that one such outcome could be that Murdoch sells MySpace to Yahoo in exchange for stock alone. On current values of both, that would give News Corporation around a quarter stake in Yahoo, and given the combined force of Murdoch's other media assets, it would make a huge media giant even more formidable.

Unsurprisingly, nobody has been willing to go on the record about any such deal, but of equal interest, surely, is the fact that nobody has come out and denied it either. Believe some, and the talks are already ongoing.

Over at Time Warner, still with AOL as a major part of the asset register, there's further food for thought. AOL is one of the premium consumer internet names of old, and like Yahoo, has significant challenges ahead of it. Pooling the resources of both would create, again, a sizeable force in the online marketplace.

On the downside, the Time Warner/AOL merger is still fresh in the memories of many stockholders, and it would be understandable if there was a real reluctance to again align the business with an internet name. Google, maybe. But Yahoo?

The list of suitors doesn't stop there. Further names that are cropping up in American analysts' reports include two communications giants, AT&T and Comcast. As both are prominent providers of high speed broadband services in the US, the power of the Yahoo brand (something that BT has already leveraged in the UK to sell broadband services) and the obvious synergies with their own work won't have gone unnoticed. Whether either would want to commit such a heavy investment to an acquisition such as Yahoo is unclear, particularly given the recent expenditure involved in rebuilding the AT&T business.

Panama

It is entirely possible that Yahoo may fend off its various suitors. Certainly it has some irons in the fire itself, and many parties are looking closely at the performance of the Panama search advertising system. It only launched back in February, and while thus far only anecdotal accounts exist of the platform's performance, the murmurings have been positive to date.

Meanwhile, amidst all the speculation, Yang has made noises that seem to indicate it is business as usual for Yahoo, leading one or two to suspect that he will try and avoid any potential sale.

Realistically, if Yahoo's share price continues to be challenged, then potential suitors, at the point where the price is right, are likely to come out of the woodwork and attempt a hostile takeover.

Don't bet against the waters at least being tested before the year is out. Also, don't bet against the power of the Microsoft chequebook, either. A MySpace/News Corporation tie up appears to have legs, too...