Yahoo! Inc. (NASDAQ: YHOO)
On July 19, Internet search company Yahoo reported a 11 percent growth in second quarter earnings, but revenue fell 23 percent due to the change in revenue presentation related to the search agreement with Microsoft Corp. (NASDAQ: MSFT).Adjusted EPS = $0.19; Street estimated = $0.18Revenue excluding Traffic Acquisition Cost = $1.08 billion; Street estimated = $1.11 billion"We experienced softness in display revenue in the second half of the quarter due to comprehensive changes we have made in our sales organization to position ourselves for more rapid display growth in the future," said Carol Bartz, CEO of Yahoo.Looking ahead, the company provided its revenue outlook for the third quarter, which was lower than the current Street expectations.Revenue excluding TAC = $1.05 billion to $1.10 billion; Street view = $1.12 billionYahoo Chief Financial Officer Tim Morse told Reuters in an interview the changes that Yahoo was making to its North American sales force meant that Yahoo was underequipped to meet demand. "In the second half for the quarter we didn't close out the good, branded advertising revenue like we could have and we should have and we plan," he said.By contrast Morse said that Yahoo was making progress in rectifying some of the problems in its search partnership with Microsoft, which had crimped Yahoo's revenue per search. Reuters

Microsoft, the world's biggest software company, may be preparing for a renewed bid for troubled search engine Yahoo. Microsoft's $44.6 billion bid for Yahoo was rejected in 2008.

Circumstances have changed.

Yahoo has been without a permanent CEO since Carol Bartz was ousted Sept. 5. In her day, Yahoo handed over large elements of its search function to Redmond, Wash.-based Microsoft, which has since introduced its Bing search engine.

Yahoo, in Sunnyvale, Calif., has also hired Goldman Sachs and Allen & Co. for strategic advice as well as Heidrick and Struggles to recruit a new boss.

Now, Microsoft has entered the fray again, signing a non-disclosure agreement, DealReporter disclosed, which could mean it will bid for the entire company again. Previously, TPG and Silver Lake Partners, both private equity giants, signed similar deals.

While Yahoo partner Alibaba Group of China indicated an interest in buying all of Yahoo and claimed to have obtained as much as $2 billion in financing from Singapore state investment fund Temasek Holdings, Yahoo director and co-founder Jerry Yang has told outsiders he'd prefer a PIPE deal, referring to a private investment in public equity.

In a PIPE, outsiders acquire a minority interest in a public company, keeping the stock listing but effectively taking control with a cooperative management.

Microsoft, which reported cash and investments of $57.1 billion last quarter, could easily participate in any Yahoo PIPE. Also, having a minority stake in Yahoo could lead to some amalgamation of its MSN and Yahoo News sites, as well as offer additional customers for Skype, the voice-over-Internet-protocol (VoIP) carrier it just acquired for $8.5 billion.

Yahoo officials have not commented on any moves on strategy. During an Oct. 18 investor call to discuss third-quarter results, Acting CEO Tim Morse refused to discuss future moves, promising details when they are ready.

Yahoo shares were unchanged at $14.96 in late Wednesday trading, while Microsoft shares fell one percent to $24.55. Yahoo's market capitalization is $18.5 billion, compared to Microsoft's $206.5 billion.