Yahoo! earnings preview, Microsoft deal rumors

Yahoo! Inc. (NASDAQ:YHOO) and Microsoft Corp. (NASDAQ:MSFT) are ironing out the final details of a search and online advertising deal, multiple media outlets are reporting Friday.

BoomTown's Kara Swisher blogs:

Top executives at Microsoft -- including SVP of the Online Audience Business Group Yusuf Mehdi, search head Satya Nadella and top digital exec Qi Lu, as well as others -- have all flown down to Silicon Valley from their Redmond, Wash., HQ today to iron out the remaining issues, which seem to have to do with the deployment of technology.

The blogosphere is bursting with several different versions of terms of the deal, but they all include Microsoft paying Yahoo! "several billion dollars upfront to take over its search advertising business and guarantee certain payments back to Yahoo," says Swisher. "There is also a display advertising element to the deal, which would likely have Yahoo take the lead in selling premium advertising for the companies."

Last month, new Yahoo! CEO Carol Bartz quipped, "I personally think we'd be better off if we never heard the word Microsoft."

Since then, there's been a lot of buzz about Bing, Microsoft's new search offering, which may be giving it a leg-up in the negotiations with Yahoo!.

Adding to Microsoft's leverage, Yahoo!'s second-quarter earnings, due Tuesday, are "going to be bad," predicts Forbes' Quentin Hardy.

Hardy writes:

With house prices down, travel down and recession-battered consumers in retreat, the ad business is bad everywhere. Expectations are for Yahoo! to earn 8 cents a share on revenues of $1.14 billion, compared with 10 cents a share and $1.8 billion, respectively, a year ago. The real question is, can Yahoo! renew its long-term brand value in the eyes of investors?

Microsoft will report earnings on Thursday, with at least one analyst forecasting they will disappoint. - Mary Kathleen Flynn

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