Mash123

Here are my notes from the Yahoo-Microsoft conference call going on right now:

Carol Bartz: This is a great day for Yahoo. A gamechanger. benefits for Yahoo. half Internet users come to us, but face a formidable competitor in search. share investment expense to scale the market. Our vision is to be center of people’s lives online. We must do that by working on our own properties or working with others like Microsoft.

Only covers search and search advertising business. Self-serve advertising will go through Ad Center. Yahoo will continue to integrate search in its properties but back-end technologies will be powered by Bing.

What this deal is really about is scale. Advertisers want an alternative that has scale. Everyone wants a real alternative and advertisers are no different.

Ballmer: About creating efficiencies. The search scale we wil get for Bing will allow us to create greater innovation for searchers and advertisers.

Win-win agreement for MSFT and YHOO. Both get more scale, advertisers get more scale, teh whole industry will benefit.

Carol Bartz: Terms of the agreement. Gives MSFT a 10-year license to Yahoo’s core search technologies. will integrate into AdCenter, which will power both our search and theirs. Display is separate.

MSFT pays 88% TAC on Yahoo’s owned and operated sites for 5 years.

Revenue will come down a bit because of revenue share, operatinng income wil be $500M higher, costs $200M lower, operating cash flow $275M higher at full implementation.

This deal won’t happen over night. We will work with regulators. Anticipate closing the deal by early 2010. Will begin with major markets including the U.S., transition to Bing in 3 to 6 months, transition from Panama to Ad Center will take 12 months.

Q&A

Q: Why not add a display advertising component to the deal? How big is the RPS gap?

Bartz: On the display side we wanted to keep this as simple and straightforward as possible.

Ballmer: We are taking a big bite here. Search is more well-known when it comes to automation on the selling side. On RPS, I don’t expect a negative consequence on our P&L, but a risk we are willing to take.

Bartz: This is more about making the outside world feel comfortable because we

Q: You moved from a deal that would generate a boatload of cash to a deal with a boatload of value. Why no upfront fee?

Bartz: What was really important to Yahoo was that we had a deal that flowed successfully through our P&L. What we really wanted was a significant TAC rate. As far as we are concerned the boatload of cash is preserving our revenue line

: CrunchGear drool over the sexiest new gadgets and hardware.