Yahoo fight could impact Bay Area

The ongoing tug of war between Yahoo and its would-be suitors is Silicon Valley’s most gripping new saga, blending flashy elements of a high-stakes poker game, a juggling act and an all-out brawl.

The Bay Area has a big stake in the ultimate outcome, as demonstrated by last week’s layoffs of 327 employees at its Sunnyvale headquarters and in Santa Clara — part of the first round of a 7 percent reduction of Yahoo’s worldwide staff of approximately 13,000.

Yahoo deserves to stay alive. It is still one of the most visited free Web sites on the Internet, with a reported 3.4 billion page views per day and 260 million e-mail accounts.

But when it comes to the all-important factor of search engine usage with associated high-profit advertising, Yahoo has fallen behind its Mountain View rival, Google. And with Yahoo stock prices at four-year lows, it seems evident that the company cannot claw its way back to profitable leadership without joining some sort of alliance.

Enter Microsoft, jumping in with typical bravado. On Feb. 1, Microsoft announced it wanted to buy out Yahoo for a price that has shaken out to approximately $41 billion, or $29 per share.

This unsolicited takeover offer would presumably result in Yahoo getting its orders from Microsoft headquarters and a significant exodus of Bay Area jobs to Redmond, Wash. — not our favorite alternative.

Obviously, Yahoo management would prefer to keep as much of its independence as possible.

The result has been a rejection of Microsoft’s opening offer and a flurry of closed-door — but swiftly leaked — meetings with at least three known high-profile potential partners.

Each of these potential marriages could bring synergistic strengths to make Yahoo more competitive, but they also come with issues — such as antitrust concerns — that might cause problems.

The deals being discussed are, in increasing order of feasibility: some sort of Yahoo merger with Time Warner’s AOL portal; outsourcing Yahoo’s search-related advertising business to the dominant Google; or exchanging 20 percent of Yahoo stock for the Web sites of Rupert Murdoch’s News Corp. — featuring the MySpace social networking leader.

But perhaps a more likely ending is that Microsoft will simply raise its offering price closer to $35 per share and produce an offer that nervous Yahoo stockholders cannot refuse.

The Examiner is in favor of whatever outcome provides Yahoo with the best chance to survive and make a comeback to its past glories.

And needless to say, we much prefer an outcome that retains a maximum number of jobs locally, where a Yahoo success would continue contributing generously to Bay Area prosperity.

General OpinionOpinion

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