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Why Yahoo Should Go Ahead With Google Outsourcing Deal

May 4, 2008
by Henry Blodget
Editor, Silicon Alley Insider

Henry Blodget

Yahoo’s search partnership with Google played a major role in allowing the company to fight off Microsoft. By offering the hope of immediately higher cash flow, it should also stop Yahoo’s stock price from falling back to the teens.

In his sayonara letter, Steve Ballmer urged Yahoo to kill the partnership, arguing that the engineers behind Panama were one of the main reasons Microsoft wanted to buy Yahoo and that, if Yahoo did the deal with Google, they would leave.

And he’s right: They will (or at least they’ll move on to other projects). That’s part of the reason the outsourcing deal makes sense: It allows Yahoo to focus on businesses it can win, instead of throwing money at a war it has already lost.

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