Yahoo! (YHOO) Closes In On Outsource Deal With Google (GOOG)

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It is no surprise that Google’s (GOOG) search technology and its ability to marry advertising with search results is better than Yahoo!’s (YHOO). Otherwise Yahoo! would have Google’s market cap instead of the very modest one its sports now.

To try to keep the ball away from Microsoft (MSFT), Yahoo! is planning to outsource some or all of its internet search features to Google. According to The Wall Street Journal, the partnership may be just around the next corner. The financial paper writes that "such a deal could increase Yahoo’s cash flow by more than $1 billion a year." In theory, that would raise the value of the portal company’s stock.

The regulators in Washington may not like the arrangement. Google and Yahoo! are the No.1 and No.2 search companies. Putting together their capacity might be fairly viewed as anti-competitive. The Justice Department may try to block the hook-up altogether.

Because the law is the law, going back to the Sherman Antitrust Act and the campaigns of Teddy Roosevelt to break up big monopolies, Google and Yahoo! are not going to form their partnership.

Microsoft has offered its $31 for Yahoo!. The value of that has dropped a bit with Redmond’s stock price. No one else is even offering a dime for Yahoo!, although at a dime it might sell.

Yahoo! will have to sell to Microsoft, but perhaps no one has told them

Douglas A. McIntyre