Deal or No Deal

The deal between Yahoo and MSN might have died a slow death but this did not deter Yahoo from striking a deal with arch rival Google. In the month of June, Yahoo had announced that Google would supply it with some search advertisements. Industry insiders view this move as an attempt by Yahoo to increase search revenue. As a consequence of this deal (if it materializes), Google would command a wider market share and consolidate its numero uno position.

The ad deal is projected to raise $800 million in revenue in its first year and would also provide operating cash to the tune of $250 million - $450 million in the subsequent years. In order to push the deal through, Yahoo has informed the regulators that the deal was reviewed on the lines of Hart-Scott-Rodino Act , which is used to scrutinize major mergers and acquisitions. Yahoo also apprised the regulators that the deal would be implemented after three and half months, giving regulators sufficient time to review and scrutinize the deal. However, the U.S. Justice department has launched a formal investigation into this deal, an indication that they may have found evidence of malpractice.

The Justice Department is expected to issue civil investigative demands (CIDs) by next week. The move is aimed at gathering intelligence from third parties. The information sought could range from general requests to specific requests aimed probing the deal. This anti-trust probe could potentially derail the deal and spell disaster for Yahoo. Yahoo has pinned a lot of hope on this deal and is desperate for it to materialize. The probe might end in the favor of Yahoo but the delay caused would inflict a massive blow to its financial condition.

In an attempt to dispel the concerns which are clouding the deal, Jerry Yang (CEO,Yahoo) met senator Herb Kohl who chairs the anti-trust committee. This committee is likely to envision the competitive landscape and the ramifications, after the deal becomes operational. The news was first announced by The Washington Post and has been broad casted over the Internet by various websites. 'Wait and watch' seems to be the name of the game.