February 19, 2008 3:18 PM PST

Microsoft exec confident Yahoo deal will work

Posted by Elinor Mills

The head of strategic partnerships for Microsoft says he's confident the company can work out a deal with Yahoo, despite reports that Yahoo is talking to News Corp. about forming an alliance to fend off Microsoft.

"We still have great confidence we can find a combination with Yahoo," Microsoft Senior Vice President Yusuf Mehdi said in an interview with Adweek published on Monday. "If anything, it's become clearer and clearer that we're the logical alternative in the marketplace."

Yusuf Mehdi

(Credit: Microsoft)

The article, which requires registration to view at Adweek, was submitted to the U.S. Securities and Exchange Commission by Microsoft and posted on the Web.

Microsoft's rationale behind the proposed takeover is that a company with combined search indexes, engineers, online advertising systems, advertisers and ad inventory will pose a much bigger threat to Google than the two companies can on their own.

"By being able to get a common framework between ourselves and Yahoo, you have a second alternative at scale, which will reduce the cost of buying and managing the media," he says. "What we're really getting here is the scale on the ad platform."

Mehdi isn't worried about tying up the companies during the process. "I think we can move speedily along the path to bring together the companies once we're able to come to an agreement and get approval through the regulatory bodies," Mehdi said. Microsoft was able to integrate its Aquantive acquisition quickly, keeping 90 percent of the management of that group, he added.

Microsoft and Yahoo "share a common vision," he said without explicitly saying what it is. But it's pretty clear that they both want to beat the pants off Google in online advertising.

Yahoo's board has informally rejected Microsoft's offer, leaving Microsoft little choice but to appoint its own slate of directors. Microsoft could raise its bid, but that likely wouldn't happen until Yahoo indicates willingness to negotiate.