Layoffs and Deals

...numbers on the terms set forth over the last year of negotiations between the two companies. However, Im thinking if Carol Bartz were interested in any of those deals, she probably would have come to Ballmer sooner. I think that theyre looking at an entirely different kind of deal, rather than a potential merger or selling off their search division, as the stories went last year.

According to CNET, Jefferies & Co analyst Youssef Squali mentions the $2+ billion search business offer from last summer, but also notes that an advertising partnership would net Yahoo some much-needed cash, too:

if Microsoft where to split its display advertising revenues 50-50 with Yahoo, that could result in roughly $600 million to $800 million in incremental revenues to Yahoo. During the fourth quarter, Squali estimates Microsoft generated $300 million to $400 million in display advertising.

Meanwhile, visions of an all-cloud future may make Microsoft a bit more desperate to deal, as MediaPost reports from Ross Sandler of RBC Capital Markets. When Microsofts current software revenue stream begins to dry up, theyll need another business model to fall back on"and so far, search aint it. Could a deal with Yahoo change that?

Another analyst that MediaPost consulted,

Trip Chowdhry, Global Equities Research analyst, suggests the deal could mean the two companies could share technologies, from email to search and display ads. This means Yahoo could tap into Microsofts Silverlight to improve display ads. Or, it might suggest that Microsoft fold Hotmail. Sources tell Chowdhry that Microsoft either would shut down Hotmail or white box Yahoo email.

However, Yahoos position isnt exactly enviable. For the first time since December, the company is rumored to be planning layoffs, to be announced as early as Tuesday, when they are scheduled to report their Q1 numbers:

The cuts would be the third round of layoffs at Yahoo in little more than a year. The Internet company, which has been struggling for more than two years, laid off about 1,000 workers early in 2008. It cut 1,400 or so in the fourth quarter of last year, in continuing efforts to prune its sprawling online business and bring down expenses. It ended the year with 13,600 employees.

So if and when Yahoo and Microsoft do reach a deal, and if said deal yields Yahoo much needed income, it may be too late for some employees.

What do you think? Do Yahoo and Microsoft need to hurry up and make a deal? Or would one just weigh the other down"and which one?

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