San Francisco - The largest investor in Yahoo blasted Microsoft's hardball takeover tactics Wednesday, as reports said the company planned to outsource some of its search advertising to Google. A link-up with Google has often been cited as Yahoo's best option to thwart the Microsoft takeover.
The Wall Street Journal, which first reported the development, said that the move involved a very limited percentage of Yahoo's Web search queries and was designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement.
While a broad alliance between the two internet giants would likely fail to pass antitrust regulations, a more limited partnership could boost Yahoo revenues by allowing it to tap into Google's more profitable search advertising system. It would also signal to Microsoft that Yahoo has other options and was accurate in its predictions for a significant increase in revenues in the coming months.
The report came as the largest shareholder of Yahoo Inc criticized Microsoft's threat to wage a proxy campaign and lower its offer for the internet giant. Bill Miller, a portfolio manager at Legg Mason Inc, said that Microsoft should have raised its bid rather than threatening to lowball if Yahoo's board did not accept the current offer within three weeks.
"Telling shareholders you are going to take something away from them is not a way to get their support," he told the Journal.
Miller said he doubted that Yahoo shareholders would support a Microsoft-led proxy campaign to replace the current Yahoo board.
Microsoft offered some 46 billion dollars in late February in a cash-and-stock deal for Yahoo. Yahoo rejected the deal as undervaluing the company, and a subsequent drop in Microsoft's share price means the offer is now worth some 41 billion dollars.
