Microsoft and Yahoo will give their search partnership more time to meet their financial expectations. Microsoft has agreed to extend, for another year, its commitment to cover revenue shortfalls experienced by Yahoo in the U.S. since turning over its underlying search technology and related advertising to be operated by Microsoft.

msyhooThe extension, disclosed in Yahoo’s latest quarterly filing, follows reports of discussions between Yahoo CEO Marissa Mayer and Microsoft CEO Steve Ballmer about the future of the search deal. The guarantees from Microsoft are designed to make up for the shortfall experienced by Yahoo compared to its revenue prior to entering the agreement with Microsoft.

According to Yahoo’s filing, the revenue guarantee had already been extended once in the U.S. and Canada, from the fourth quarter of 2011 through March 2013. “On April 30, 2013, Microsoft extended the RPS Guarantee in the U.S. for an additional 12 months commencing April 1, 2013,” the filing says, as noted by Search Engine Land.

It’s not an insignificant amount of money. Reuters, which originally spotted the filing, reports that UBS analyst Eric Sheridan raised his gross revenue estimates for Yahoo by $60 million over the next four quarters to reflect the extension of the search revenue guarantees.

Microsoft and Yahoo had originally hoped to knock Google down a peg by joining forces, but their partnership has fallen short of expectations. Microsoft originally reached the deal during tenure of Carol Bartz as Yahoo CEO. Mayer, the former Google executive, joined Yahoo as CEO last year.

RELATEDSearch stats: Google slips, Microsoft continues slow growth



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  • guest

    Ballmer has already lost $15B on search. So what’s another 60M? When is somebody going to finally say “enough!” and fire this tool?

    • lan

      $15B in book value would add maybe $1 a share to the stock price. And take away the $2B in yearly loss at current P/E would add another $2 or $3 a share. Or about 10% higher stock price.

      Conversely, it’s hard to estimate how much bing has helped the company. Maybe it gave them a groundwork to build out their cloud platform more successfully. Or maybe the data gathered jump started the Kinect voice command algorithms. We don’t know, but the board does, and the board is probably filled with people smarter and more ruthlessly capitalistic than you and I. So I’m guessing that they have a reason, a profitable one at that, for keeping bing around while it bleeds money.

      • Hm

        That may be so, but that ruthlessly capitalistic MS board missed most trends in IT for the past decade compared to other vastly more successful and ruthlessly capitalistic boards. You have to compare an Olympic athlete or sports team to their peers, not to the couch potato watching TV at home. Yet the couch potato has a right to criticize an athlete or team for under-performing. If you don’t get a medal you suck, albeit on a high level.

      • guest

        Let’s put this in perspective. $15B is more than Apple’s total R&D spend over the last decade. For <$15B, Apple created entirely new multi-billion businesses like iPod, iPhone, iPad (in all three cases destroying MS despite the latter's head start), and revived their Mac line. They days of believing that MS's "investments in the future" will pay off are over. They haven't. Almost all have been massive failures, which is why Apple is now a larger and more valuable company than MS. The board was in charge during that epic reversal of competitive position. So saying "the board knows" is effectively worthless. Did they know best when they allowed an equivalent amount of money to be blown on IPTV over more than a decade, only to recently acknowledge defeat by selling that off?

        MS keeps Bing around because a) they're still deluding themselves that they can win and b) they realize Google's monetization model for software is the future. If they can't create an equivalent, they understand that longer term a decline is inevitable.

  • Scott Moore

    Even deep pockets can’t stop the train wreck we call Ballmer. But you have to hand it to him – he recognized long ago that Microsoft couldn’t live on Windoze and Office alone, so he’s done very well at diversifying the company’s losses.

    • guest

      Get a life, troll.

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