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Trusted sources inside both Microsoft and Yahoo tell me a Sunday Times of London story suggesting a multi-billion dollar partnership between the two is imminent is not true.
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A source close to Microsoft [MSFT
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] who did not want to be named because of the sensitivity of the situation tells me Sunday morning that none of the facts of the story, which broke Saturday evening, are true.
The article claimed that Microsoft was preparing to offer $20 billion for Yahoo's [YHOO
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] Search business -- what many believe would be a hefty premium for the business -- in a complex partnership that could have capped months of on-again/off-again discussions between the two sides. The botched negotiations, which once included a $47 billion offer by Microsoft to acquire the entire company, ultimately cost Yahoo co-founder Jerry Yang his job as CEO. Yahoo's entire market cap recently dipped to $12 billion.
Yang has widely been viewed as the main obstacle to getting a deal done with Microsoft, either for the entire company, or just for Yahoo's Search business.
He was also unable to consummate partnerships with Google [GOOG
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] and Time Warner's [TWX
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] AOL division.
The Sunday Times article also raised concerns about what role, if any, investor Carl Icahn might have played in a deal with Microsoft. He has long supported a total merger, or at least Yahoo selling its Search business to Microsoft. He dropped his plans for a proxy war to unseat Yahoo's board after the company agreed to give him a seat, along with two of his designees on its board.
The Sunday Times article said that several Yahoo directors had been aware of, and signed off on, this arrangement with Microsoft. But just last week, it was disclosed that Icahn had increased his stake in Yahoo to 5.5 percent of the company. Had he done so with knowledge of a pending partnership with Microsoft, it could raise concerns about what Icahn knew, and when he knew it, if he were increasing his position in Yahoo with a deal with Microsoft looming.
Several sources inside both companies dismissed the Times report as ongoing speculation swirling around these two companies, but that no material movement has been made toward getting any kind of deal done.
A Microsoft source also tells me that CEO Steve Ballmer, frustrated by his dealings with Yang, co-founder David Filo, and Chairman Roy Bostock, is likely going to wait for Yahoo to name a new CEO first before considering whether to re-open negotiations with the company. This source says Ballmer was confused before about who the decision-makers were, and it's a mistake he will not make again.
And with a CEO search underway and likely to take months, it would appear this saga may continue for some time.
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