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The new search advertising deal between Yahoo and Google is unlikely to win U.S. antitrust approval, and therefore may open the door to a new bid for Yahoo from Microsoft, an analyst said Tuesday.
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Under the revised deal the two companies have proposed to the Justice Department, Yahoo and Google significantly scaled back the scope of their agreement, including shortening the length of the partnership to two years from 10, a source told Reuters on Monday.
Sanford Bernstein analyst Jeffrey Lindsay called the revised offer a "desperate gambit." He said in a note that he expected the Justice Department to defer a decision until next year, and expects the agreement to eventually fall apart.
Should that happen, Microsoft [MSFT
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] might renew its effort for Yahoo with an offer of around $20 a share, Lindsay said.
Microsoft had offered as much as $33 per share for Yahoo earlier this year.
"We expect the DoJ to defer a decision to next year and believe they are preparing for an antitrust showdown with Google," Lindsay wrote. "We expect the Google-Yahoo deal to founder, leaving Yahoo unable to acquire AOL's portal and stuck in a stand-alone value trap."
Yahoo has been in talks with Time Warner [TWC
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] about the advertising and content assets of AOL.
Shares of Yahoo [YHOO
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] rose 4.71 percent to close at $13.35, while Google [GOOG
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] shares climbed 5.9 percent to $366.94. Microsoft added 4.02 percent at $23.53 on Nasdaq.
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