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Microsoft’s proposed 2008 purchase of Yahoo never happened: Yahoo rejected the proposal, and Microsoft later withdrew it. Instead, the companies formed a long-term search partnership in 2009. Yahoo’s operating business was eventually sold to Verizon in a deal signed in 2016 and completed in 2017.
How the Microsoft–Yahoo story unfolded
February 1, 2008: Microsoft proposes buying Yahoo
Microsoft proposed acquiring all outstanding Yahoo common shares for $31 per share, payable in cash or Microsoft shares. It put the proposal’s equity value at approximately $44.6 billion. Microsoft presented the deal as a way to compete in online services, search and advertising; those were the bidder’s stated reasons for making the proposal, not an independent assessment of its likely merits. Microsoft’s announcement
February 11, 2008: Yahoo rejects the proposal
Microsoft said Yahoo had rebuffed its proposal and described the $31-per-share price as a 62% premium to Yahoo’s January 31 closing price. That premium is Microsoft’s characterization as the bidder. Microsoft later recorded that it withdrew the proposal; the acquisition was never completed. The available company filings do not establish Yahoo’s board’s full reasoning, so no single motive for the rejection can be treated as settled fact. Microsoft’s February 11 response · Microsoft’s 2008 annual report
July 29, 2009: the companies announce a search partnership
Rather than a takeover, Microsoft and Yahoo announced a search agreement. Microsoft would provide algorithmic and paid search for Yahoo properties, while Yahoo would retain its brand and the ability to shape the search-results experience on its sites. The announcement also set out revenue sharing and guarantees in certain countries, and gave Yahoo the exclusive worldwide role of selling premium search advertising for both companies. Microsoft’s adCenter would serve self-service search ads, and Microsoft would receive an exclusive 10-year license to Yahoo’s core search technology. Microsoft’s announcement
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The agreement concerned search, not all of Yahoo’s businesses. The announcement excluded Yahoo’s other web properties and products, email, instant messaging and display advertising. Microsoft CEO Steve Ballmer described the agreement’s intended benefits as “more innovation in search, better value for advertisers and real consumer choice.” That was Ballmer’s rationale, not proof that those outcomes followed. Microsoft’s announcement
December 4, 2009: definitive agreements are signed
The companies entered into the definitive license and search and advertising services and sales agreements on this date. Microsoft would be Yahoo’s search engine and search advertising provider under the arrangement, but Yahoo retained the right to design the search-results user experience on its own sites. Their other products and business areas remained separate. European Commission decision in Case M.5727
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February 18, 2010: the European Commission details the revenue arrangement
The Commission’s account specified that, for the first five years, Microsoft would retain 12% of search revenue generated on Yahoo’s own and partner sites, with 88% paid to Yahoo as traffic acquisition cost. This describes the stated allocation for that initial five-year period; it should not be read as proof that the same split continued throughout the full agreement term. European Commission decision in Case M.5727
July 23, 2016: Yahoo agrees to sell its operating business to Verizon
Yahoo agreed to sell its operating business to Verizon for a stated cash purchase price of $4,825,800,000, subject to adjustments. The transaction did not include all of Yahoo’s holdings: exclusions included cash and marketable securities, Yahoo’s stakes in Alibaba and Yahoo Japan, certain other investments and specified intellectual property. Yahoo also retained certain liabilities. Yahoo preliminary proxy statement
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Verizon reported that the transaction closed for approximately $4.8 billion. It combined Yahoo’s operating business with its existing media business. After closing, Yahoo changed its name to Altaba. Verizon Form 10-Q
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How the three deals differed
| Event | Structure and scope | Value or terms | Outcome |
|---|---|---|---|
| Microsoft proposal, 2008 | Proposed acquisition of all outstanding Yahoo common shares | $31 per share in cash or Microsoft shares; approximately $44.6 billion in proposed equity value | Yahoo rejected it; Microsoft withdrew the proposal, and no acquisition closed |
| Microsoft–Yahoo agreement, 2009 | Search partnership and technology license, not a purchase of all Yahoo | 10-year search arrangement and exclusive 10-year license to Yahoo’s core search technology; the European Commission specified a 12%/88% revenue allocation for the first five years | Microsoft supplied search and advertising infrastructure; Yahoo retained control of the search-results experience on its sites |
| Yahoo–Verizon transaction, 2016–17 | Sale of Yahoo’s operating business, with specified exclusions and retained liabilities | $4,825,800,000 stated cash price in the 2016 agreement, subject to adjustments; Verizon reported approximately $4.8 billion at closing | Closed on June 13, 2017; Verizon combined the business with its existing media business |
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