Yahoo and Facebook are not currently in talks about forming a search alliance or building a search engine together, according to my sources, who scoffed about such a deal reported in a thinner-than-tissue-paper post by the Telegraph earlier today.

In addition, Yahoo is not anywhere near ending its search partnership with Microsoft, although new CEO Marissa Mayer has been in touch with the software giant about improving performance that has been less than lackluster over the course of its history so far.

Despite this, it would be nearly impossible for Yahoo to extricate itself from the long-term contract easily — though there are certain, but very difficult, outs. But sources tell me Microsoft would fight any attempt to end it earlier.

Thus, while Yahoo and Facebook have had a very good relationship of late, after the pair stopped warring over patents, and have also had success with its various sharing initiatives, a substantive search collaboration is not now in the mix.

Could the pair do more in terms of sharing among its users? Sure! Could they more tightly integrate services? Yep! Could they do something jointly related to advertising? Why not! But will they build a search engine together? Not likely.

Indeed, I am not even sure what such a thing means, since it would now be nearly impossible to execute, given Yahoo has outsourced its core search technology long ago to Microsoft and has been largely focused on improving search experience since then.

Of course, it’s no secret that Facebook is likely to enter the search arena in a more substantive manner in the future — CEO and co-founder Mark Zuckerberg has said so publicly — because people expect a better experience and users have been asking for years for improvements.

So watch that space, for certain, as it could also be very lucrative for the company and perhaps give search leader Google a bit more of a race.

But the social networking site is likely to work on its own in such an effort — as well as approach the space in much different ways. Hooking up with Yahoo would bring it almost nothing it might need to make it a success.

There are some interesting what-ifs to ponder with the idea of Microsoft, Facebook and Yahoo forming some kind of Avengers-style effort to battle Google, especially if it had a mobile element. But that’s the movie version at this moment.

(Speaking of movies, I am sorry it took me so long to get to this, but I was seeing the final “Twilight” with some All Things Digital staffers. I can report that the sparkly vampires of the film are also not in search alliance talks with Facebook.)

One unusual phrase in the Telegraph article did catch my eye though, which noted that “board members expect the talks to lead to much more substantial collaboration based around Web-based search.”

Such a Facebook search tie-up rumor would certainly do wonders for a Yahoo stock pop tomorrow for all the hedge funds now piling into the Silicon Valley Internet giant, would that it were so.

But it’s not.

Later today, new Yahoo CEO and latest savior Marissa Mayer is expected to debut in her first major turn as a public company CEO, as the company reports its third-quarter earnings.

Unfortunately, her initial script recounting the last three months is likely to be rather lackluster, with Wall Street anticipating yet another nothing-to-write-home-about financial performance from the Silicon Valley Internet giant.

Investors are expecting $1.08 billion in revenue and 25 cents in net income per share in a report that is likely to show more of the same kind of weakness Yahoo has had for far too long. The main reasons this time: Worrisome growth in search and display advertising, especially compared to robust worldwide trends.

Such concerns have kept Yahoo’s stock pretty much flatlined at about $16 a share since she arrived in July.

And that is not likely to change until Wall Street hears more specifics about Mayer’s future plans. Yahoo has previously said she would outline more about her direction on the call with investors later today, after the financial results are released.

Thus, it’s basically a wait-and-see attitude, until Mayer does that, and perhaps until after there is some actual traction.

As noted by Cantor Fitzgerald’s Youssef Squali:

“1) We’ve seen this movie before (this new CEO is the fifth in as many years) and 2) it will take some time before any of the yet-to-be-announced changes yield any meaningful P&L results. Until then, we see Yahoo! shares remain cheap with limited downside, but no clear catalyst to drive them higher short/medium-term.”

Among the highlights that investors hope will be covered by Mayer and also by new CFO Ken Goldman:

A cogent strategy to turbocharge the business, which — as ATD has reported many times — will focus on tech and product solutions; what acquisition arenas are in the pipeline; plans for new talent recruitment and perhaps layoffs of less-than-stellar employees at the bottom 20 percent of Yahoo; the status of talks to sell off its stake in Yahoo Japan; and, perhaps most of all, what are the plans to return cash to shareholders from its recent sale of its partial stake in China’s Alibaba Group.

That might already be in the works via stock buybacks that Yahoo has been engaged in, but it will be interesting to see if Mayer will provide more specifics.

Investors will also look for some details around mobile growth, and perhaps an update of how Yahoo is fixing its search monetization problems with its partner, Microsoft.

One development that some expect is that Mayer will drop future expectations, in a classic take-out-the-trash move.

As J.P. Morgan’s Doug Anmuth noted:

“Similar to what AOL CEO Tim Armstrong did when he stepped in a few years ago, we believe Mayer is likely to remove low quality ad units and over-monetization throughout the site. Despite the near-term monetization impact, we think this would be a good thing, as it would improve the user experience and de-clutter the site. Additionally, we think it’s likely new management would simply want to start off with a low bar.”

And, if she makes it low enough, anything Mayer will do going forward is likely to look pretty good.

Yahoo CEO Marissa Mayer is considering joining the board of Jawbone, the high-profile wireless gadget maker whose products include the Jambox speaker and the Up personal fitness wristband, according to sources close to the situation.

Mayer has been talking to the San Francisco-based company about becoming a director since before she become the top exec at the Silicon Valley Internet giant.

While the discussions of her becoming a director are in the late stages, sources cautioned it was not yet a done deal and that it still might not happen for a number of reasons.

That said, the move is an interesting one for Mayer and Jawbone.

The former Google exec is well known for her product chops and also her deep interest in tony aesthetics and high-level design — qualities that Jawbone is well known for.

And the addition of Mayer to the board of Jawbone would add someone with experience in scaling businesses from small to large as well as deeper technical expertise.

Mayer has been an active angel investor in start-ups and currently is on the board of Walmart Stores and is also on board of several cultural institutions in San Francisco and New York.

Jawbone has raised about $210 million in funding from such venture firms as Andreessen Horowitz, Khosla Ventures, Kleiner Perkins and Sequoia Capital, as well as Deutsche Telekom, investor Yuri Milner and others.

One interesting note: Mayer and Jawbone CEO and founder Hosain Rahman attended Stanford University at the same time and have remained close friends since then.

Jawbone declined to comment and Mayer never calls me back, although I am still waiting by the phone — wearing my denim Jawbone Icon HD wireless headset, natch — in the vain hope that she might.

Yahoo said today in a regulatory filing that it had hired one of Google’s top sales execs, Henrique De Castro, as its COO.

Earlier today, I had reported that CEO Marissa Mayer had been close to nabbing the advertising exec, who has most recently been Google’s president of partners business solutions.

De Castro is getting a pile of money for taking the job, including a $600,000 yearly base salary and an annual bonus that could double that figure. In addition, the Silicon Valley Internet giant will give him $36 million in stock grants, including a one-time retention equity award of $18 million and $18 million in the form of performance-based stock options.

He is also getting $1 million in “make-whole” cash for forgoing compensation from Google and $20 million in stock to replace his shares at the search giant that will vest over four years.

That is a very big check, although Mayer garnered an even bigger one when she joined the company in July.

Yahoo’s regulatory statement on the De Castro hiring is embedded below in its entirety, so you can read about his new riches for yourself (unless Yahoo’s persnickety legal head tries to block it).

Said a Google spokesperson about the departure: “We’re grateful to Henrique for all of his contributions at Google and wish him all the best in his new role at Yahoo!”

Both Mayer and also former Yahoo CEO Scott Thompson have made previous overtures to nab De Castro, who has held a number of high-level jobs for Google across the globe, including at DoubleClick, in display ads and with major partners.

While he had previously rebuffed those efforts, this time De Castro bit.

There were signs he might this past week, after De Castro canceled a major offsite for his employees, and several attendees who know him well said he was not present at the company’s first night of its annual Zeitgeist event for advertising and publishing clients. The suave De Castro is usually a more noticeable fixture at such gatherings.

This is Mayer’s first big hire at Yahoo, having added only lower-level or less well-known execs to her stable of talent since she was appointed.

She touted the hire in a tweet, although the news was long out the door, while also noting on Twitter it was her first full day at the office since having her first baby two weeks ago.

My first full day back in the office, and I’m excited to kick it off by announcing my new COO, Henrique de Castro: businesswire.com/news/home/2012…

— marissamayer (@marissamayer) October 15, 2012

The hiring does create a potential issue in the sales arena, especially with current head of revenue Michael Barrett. De Castro and Barrett worked together at Google and multiple sources said the pair did not get along there.

It might not matter. While Barrett has publicly said he planned to stay at Yahoo under Mayer — he was hired by interim CEO Ross Levinson this summer before she arrived — many sources said he does not want to be at the company for the long term.

De Castro has a lot of work to do for the big payout he is getting and it will be a big challenge for him to turn around the troubled organization.

Along with declining growth, search market share, engagement and more, Yahoo also has had a management turnover issue of epic proportions.

De Castro will presumably be in charge of making it all better at Yahoo when he arrives sometime before the beginning of the year and is likely to focus on operations while Mayer zeroes in on products.

One area of trouble: While she has lavished attention on cultural issues and on the company’s tech troops, sources said most of the advertising and media leadership at Yahoo have had little interaction with Mayer since she arrived this summer.

Advertising, of course, is Yahoo’s biggest money maker.

The Portugal-born De Castro has a lot of experience here and is decidedly more of a charmer than Mayer.

More importantly, he is a very high-profile hire, as well as a colorful one. He speaks a menu of languages, dresses with a lot of style and is a worldwide traveler. I know him a little bit and find him to be smooth and confident, even if a little cagey.

Before Google, De Castro worked at Dell and also McKinsey.

All this makes him a perfect choice for Mayer, who is also a former Googler, since she has been considering purchasing a range of companies in the advertising tech space. The most likely candidate of late is PubMatic, which has been in early talks with Yahoo about being acquired.

The Silicon Valley start-up would be a solid add to Yahoo’s ad platform offerings, especially if it wants to stay competitive with Google. PubMatic helps publishers effectively manage their display ad inventory, and competes with Google’s AdMeld.

(Ironically, Barrett ran that start-up, which he sold to Google for $400 million about a year ago.)

Here is the De Castro hiring document from Yahoo:

YHOO-20121015-8K-20121015

And here is the official press release from Yahoo:

Henrique de Castro Named Chief Operating Officer of Yahoo!

October 15, 2012

SUNNYVALE, Calif. – Yahoo! Inc. (NASDAQ: YHOO) announced today that Henrique de Castro has been hired as chief operating officer (COO). Reporting directly to Yahoo! CEO Marissa Mayer, de Castro will be responsible for strategic and operational management of Yahoo!’s sales, operations, media and business development worldwide.

“Henrique is an incredibly accomplished and rigorous business leader, and I’m personally excited to have him join Yahoo!’s strong leadership team,” said Marissa Mayer, CEO of Yahoo!. “His operational experience in Internet advertising and his proven success in structuring and scaling global organizations make him the perfect fit for Yahoo! as we propel the business to its next phase of growth.”

“The combination of Yahoo!’s unique properties with high quality content, its renewed focus on outstanding user experience and its massive reach bring tremendous value to users, advertisers and partners,” said de Castro. “This is a pivotal point in Yahoo!’s history, and I believe strongly in the opportunity ahead. I can’t wait to join Marissa and the team and get started.”

De Castro brings more than 20 years experience leading operations, strategy, partner management and revenue generation for some of the world’s leading brands. Most recently, he was vice president of Google’s worldwide Partner Business Solutions group, where he was responsible for advertising platforms and services for Google’s publisher and commerce partners. Prior to that, he led Google’s media, mobile and platforms organization, where he helped to grow the business significantly. Prior to Google, de Castro spent two years at Dell Corporation, where he managed sales and business development operations across Western Europe. He has consulted for McKinsey & Company, where he advised numerous clients across many different industries. His career also includes senior positions in private equity and advertising businesses.

De Castro will join the company on or before January 22, 2013, or as soon as he has satisfied his obligations to his current employer.

Yahoo said in a court filing that it is in settlement talks with Facebook over its patent infringement litigation.

The Silicon Valley Internet giant asked for a two-week delay for a hearing on the legal battle, noting, without a great deal of detail, that “the parties are currently engaged in settlement negotiations to resolve this dispute.”

AllThingsD.com had already reported two weeks ago that the pair were engaged in serious talks to end the litigation. The settlement is in advanced stages and hinges on a variety of terms around cross-licensing patents and an enhanced partnership between Yahoo and the social networking giant. It is unlikely any substantive cash payment will trade hands.

Top execs at Yahoo and Facebook have been hammering out the outlines of a deal over the last several days to end their contentious patent infringement litigation, according to multiple sources close to the situation.

While that could change, sources said a settlement could happen in the coming weeks and that the advanced negotiations will put aside the lawsuits and counterclaims between the one-time close partners and return them back to what could be an even closer relationship.

The key terms being discussed, said sources, include a massive cross-licensing of patents between the Internet giant and the social networking kingpin and an even deeper integration of Facebook into Yahoo and vice versa, which has been a key element of improved engagement of late on Yahoo.

One possible glitch: While Facebook has indicated a willingness to perhaps buy some of Yahoo’s valuable patents, sources said the company is not likely to fork over a massive cash payment to Yahoo as part of a deal.

In a slap to Yahoo’s lawsuit, Facebook recently paid Microsoft $550 million to both buy and also license key patents that the software giant had acquired from AOL, and sources said it is unlikely to do the same for Yahoo.

“Facebook paid a lot of money for patents already, just not to Yahoo,” said one person close to the situation.

That could be a tough reality to swallow for Yahoo, especially since its lawsuit was predicated on the notion that it could get a huge payoff from Facebook in any settlement.

That was the argument used by former CEO Scott Thompson, under whose leadership the legal action was first filed, to convince Yahoo’s board to move forward. The lawsuit caused much consternation in Silicon Valley, but Yahoo’s directors had been told that success could mean many billions of dollars from Facebook to end the fight.

But Thompson was recently ousted from his job over a resume-padding controversy, and it appears that Yahoo board members who pushed for the lawsuit are now distancing themselves from its filing.

In other words, it was all Scott’s fault, so now that he’s gone: Bygones!

Let’s be clear: It wasn’t his doing alone by any means, but Yahoo is now facing an uphill and long-term battle in the case to win anything at all.

That’s why its new interim CEO, Ross Levinsohn, along with several board members, including Third Point’s Daniel Loeb, have stepped up talks.

(Yahoo’s on a bit of a goodwill mission, recently adding activist shareholder Loeb as a Yahoo director after settling its proxy fight with him, as well as finally completing a complex asset sale deal with China’s Alibaba Group.)

Interestingly, for Yahoo’s side, this negotiation now appears to be more of a group effort — with board members actively involved — than a solo performance by Levinsohn as the company presses for a solution now.

Facebook is also very motivated to get rid of the problem, especially because its recent borked IPO has taken up a lion’s share of the media and investor perception and attention. Sources said execs there hope that a successful settlement with Yahoo — as well as an expected announcement of an integration with Apple’s iOS at the Worldwide Developers Conference in mid-June — will return the focus to forward momentum by Facebook.

To underscore the importance of settlement, the discussions are being led by the social networking site’s powerful COO, Sheryl Sandberg, along with its VP of partnerships, Dan Rose.

Sandberg and Levinsohn (and his posse of hey-can-I-help-too Yahoo directors) talked in depth about the settlement at the recent 10th D: All Things Digital conference earlier this week, after a number of previous discussions had already taken place.

As AllThingsD reported several days ago they would, Yahoo and Alibaba Group have finally reached an agreement for the Silicon Valley Internet giant to sell back half its stake in the Chinese Web company in a $7 billion deal.

The taxable shares sale agreement, which is now being approved by both boards, is part of a larger and more complex arrangement, which will also include a multibillion-dollar stock buyback by Yahoo and an eventual IPO of Alibaba.

And, perhaps most importantly, it will bring to an end what could be the longest running global cat fight in Internet history, in which the long-time partners have bickered over the terms of their relationship for years now.

It has mostly been over how they could get to the transaction they should be announcing later tonight (or morning in Hong Kong, which it is there now). While it could fall apart at the last minute, that is highly unlikely at this point.

(Update: The Yahoo board has approved the deal unanimously, said sources, so it is done done.)

(Update 2: Yahoo and Alibaba both confirmed the deal in a joint press release, which is below.)

Thus, after many failed attempts to strike a tax-free deal — also involving Yahoo’s Japanese partner, SoftBank — collapsed, the pair have finally settled on a taxable deal, which could net Yahoo upwards of $4 billion.

The transaction values Alibaba at $35 billion and is subject to a number of funding issues that could change the value of the deal.

But here is the overall situation, as I previously reported:

Yahoo is set to sell half of its roughly 40 percent stake in Alibaba, in a taxable deal. The transaction is likely to value that portion of Yahoo’s holdings at about $7 billion — or 20 percent of Alibaba’s $35 billion enterprise valuation. Alibaba is in the midst of raising capital to fund the sale.

After taxes of upward of 35 percent are paid on the long-term gains — remember that Yahoo bought the now-lucrative Alibaba stake for just $1 billion in 2005 — the company will use the funds to buy back its own shares. That stock has been caught in the mid-teens doldrums for quite a while, so this could help boost shares significantly.

A shareholder dividend is also being considered by the Yahoo board, but it is unlikely. It’s also not clear if some of the cash will be held back for acquisitions by Yahoo, sources added, but it is also unlikely.

As part of the deal, sources said, medium-term incentives have been put in place for Alibaba to move forward with a public offering, which sources stressed is without contractual obligation or a time frame. Alibaba execs have already been publicly indicating such a direction recently, but this will put them more firmly on that path.

Although there are no plans to go public as yet, the IPO incentive revolves around several terms, including the right to buy back half the remaining stake, which expires in December of 2015. As I previously reported, Yahoo will be required to sell back half of the 20 percent remaining stake upon IPO and the other half after that if Alibaba goes public in the time frame agreed to.

Lastly, the Alibaba voting rights for both Yahoo and SoftBank are much diminished in the new deal, according to sources, to under 50 percent.

Translation: Alibaba CEO Jack Ma is now in the driver’s seat completely.

Once close, the pair have been wrangling over the large Yahoo ownership, which Ma has been trying to dislodge in a variety of nice and not-so-nice ways. It has resulted in a number of very public disagreements.

That included a nasty back-and-forth over its Alipay unit with now-fired CEO Carol Bartz, threats of takeover of Yahoo with private equity firms and, more recently, making friendly with its just-ousted CEO, Scott Thompson.

Those talks with him in recent weeks, which included a visit to China by Thompson, led to the new deal, which was negotiated primarily between Yahoo’s CFO Tim Morse and legal head Mike Callahan and Ma and Alibaba’s Joe Tsai.

The talks continued even as Thompson was suddenly engulfed in a controversy over a fake computer science degree on his resume that quickly led to his departure from Yahoo.

Ironically, the error was first discovered by activist shareholder Daniel Loeb, who is now voting on the deal as a newly named director of Yahoo, after successfully helping to oust Thompson.

He owns almost 6 percent of Yahoo.

The final decision to approve the deal was in the hands of a very new board of Yahoo, which has been drastically reshaped in recent weeks. It met to decide on the deal this weekend.

While the deal with Alibaba is finally nearing an end, Yahoo’s talks to sell its 33 percent stake in Yahoo! Japan is not part of this agreement. That’s due to what Thompson had called a “valuation gap,” which sources said is still an outstanding issue.

New interim CEO Ross Levinsohn has not been involved in the Alibaba deal in any significant way. But he certainly will benefit from its halo effect, if approved, especially given that it will likely boost Yahoo shares.

It also puts Yahoo in a unique situation, in which it must sink or swim more largely based on the value of its troubled core business.

That could mean a lot of things, including the eventual sale of the company, whose most lucrative asset recently — its Alibaba holding — will matter much less.

As soon as I get the press release, I will post it here, but no one is commenting, despite the inevitable happy ending to this long-running story.

And here’s the press release, finally:

Yahoo! and Alibaba Reach Agreement on Comprehensive Plan for Alibaba Stake Agreement Realizes Significant Value, Immediate Liquidity and Path to Future Monetization

Yahoo! Board Increases Share Repurchase Plan by US$5 Billion

May 20, 2012 — Sunnyvale, California and Hangzhou, China – Yahoo! Inc. (NASDAQ: YHOO) and Alibaba Group Holding Limited today announced they have entered into a definitive agreement for a staged and comprehensive value realization plan for Yahoo!’s stake in Alibaba.

The first step is the repurchase by Alibaba of up to one-half of Yahoo!’s stake, or approximately 20% of Alibaba’s fully-diluted shares. The purchase price will be based on a valuation of Alibaba to be established through equity financings that Alibaba intends to undertake to finance the transaction, subject to a floor valuation of approximately US$35 billion. The agreement includes substantial financial incentives for Alibaba to raise the additional equity at a valuation higher than US$35 billion. At the minimum price and assuming the initial repurchase of the full 20% stake, Yahoo! would receive from Alibaba consideration of approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock.

The agreement also establishes a framework for Yahoo! to monetize its remaining interest in Alibaba in stages. First, at the time of an initial public offering (IPO) of Alibaba in the future, Alibaba will be required either to repurchase one-quarter of Yahoo!’s current stake at the IPO price or allow Yahoo! to sell those shares in the IPO. Second, following such an IPO, Yahoo! has registration rights and rights to marketing support from Alibaba to enable Yahoo! to dispose of its remaining shares, at times of Yahoo!’s choosing following a customary lock-up period.

This agreement is a result of extensive discussions between the two parties and a comprehensive review of both taxable and tax-efficient alternatives. Yahoo! and Alibaba believe this agreement to be the best path to align incentives and maximize value for shareholders of both companies and it paves the way for Alibaba to achieve future public market liquidity for all of Alibaba’s shareholders. For Yahoo!, the agreement provides for a staged exit over time, balancing near-term liquidity and return of cash to shareholders with the opportunity to participate in future value appreciation of Alibaba.

“Today’s agreement provides clarity for our shareholders on a substantial component of Yahoo!’s value and reaffirms the significance of our relationship with Alibaba,” said Ross Levinsohn, Interim CEO of Yahoo!. “We look forward to continued collaboration with the Alibaba team on business initiatives as we explore joint opportunities for growth and benefit from Alibaba’s future. I want to thank Jack Ma, Joe Tsai and the Alibaba team, as well as Tim Morse, Michael Callahan and our Yahoo! team for their dedication in achieving this successful outcome.”

“This transaction opens a new chapter in our relationship with Yahoo!,” said Jack Ma, Chairman and Chief Executive Officer of Alibaba Group. “I look forward to working with Ross Levinsohn and the Yahoo! team as Alibaba builds China’s leading e-commerce company. Yahoo!’s global audience reach will provide attractive partnership opportunities for Alibaba to explore markets outside of China. The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future.”

“We look forward to delivering the proceeds of the near-term transaction to our shareholders, and to the further enhancement of value and the additional monetization in the future that this agreement enables,” said Timothy R. Morse, Executive Vice President and Chief Financial Officer of Yahoo!.

In addition to the share repurchase, the companies have also agreed to amend their existing technology and intellectual property licensing agreement. Among other things, this amendment will result in Yahoo! granting Alibaba a transitional license to continue to operate Yahoo! China under the Yahoo! brand for up to four years, while restrictions on Yahoo!’s ability to make other investments in China will be terminated. Alibaba will make an upfront lump sum royalty payment of US$550 million to Yahoo! and continuing royalty payments for up to four years. In addition, Alibaba will license certain patents to Yahoo!. Upon closing of the repurchase transaction, the Alibaba shareholders’ agreement will be amended so that the parties’ respective rights will be commensurate with the parties’ post-closing level of ownership in Alibaba. Yahoo! will continue to be represented on Alibaba’s board of directors with the right to appoint one of four existing directors.

Yahoo! intends to return substantially all of the after-tax cash proceeds to shareholders following the closing of the transaction. While the form of the return of capital to shareholders has not yet been finalized, Yahoo!’s board has increased Yahoo!’s share buyback authorization by US $5 billion concurrently with this transaction.

The transaction is subject to customary closing conditions. Alibaba will be required to close the repurchase with respect to at least one-quarter of Yahoo!’s current stake in Alibaba regardless of the amount of financing raised, and up to one-half of Yahoo!’s current stake if it obtains the requisite financing. Alibaba intends to finance the repurchase through a combination of its own cash resources, debt, equity and equity-linked financing. The transaction is expected to close within approximately six months.

UBS Investment Bank acted as lead financial advisor to Yahoo! and Allen & Company LLC and Goldman Sachs & Co. also served as financial advisors. Skadden, Arps, Slate, Meagher & Flom LLP acted as lead legal counsel to Yahoo! and Weil, Gotshal & Manges LLP also acted as legal counsel. Munger, Tolles, & Olson LLP acted as legal counsel to the Yahoo! Board of Directors. Credit Suisse acted as lead financial advisor to Alibaba and Wachtell, Lipton, Rosen & Katz acted as lead legal counsel to Alibaba. Freshfields Bruckhaus Deringer LLP acted as counsel to Alibaba on certain financing and Hong Kong legal matters and Fenwick & West LLP acted as counsel to Alibaba on intellectual property matters.

Yahoo is in the final stages of selling a large chunk of its stake in the Alibaba Group back to the company — in a complex deal that is set to include a multibillion-dollar share buyback to investors of the Silicon Valley Internet giant and an eventual IPO of the Chinese company — according to multiple sources close to the situation.

The deal has yet to be officially approved by the boards of both companies, but sources said it is likely to be, and could be announced as early as Monday.

This all could change, of course, since negotiations between Alibaba and Yahoo have taken place in a variety of ways in recent years, without success and with much acrimony. Talks over a tax-free deal — also involving Yahoo’s Japanese partner, SoftBank — collapsed in February, for example.

But the 324th time is apparently the charm — so here are the details of what looks to be a nearly complete agreement that I have ferreted out thus far from lots of relieved sources familiar with the situation:

Yahoo will sell half of its roughly 40 percent stake in Alibaba, in a taxable deal. The transaction is likely to value that portion of Yahoo’s holdings at about $7 billion — or 20 percent of Alibaba’s $35 billion enterprise valuation. Alibaba is in the midst of raising capital to fund the sale.

After taxes of upward of 35 percent are paid on the long-term gains — remember that Yahoo bought the now-lucrative Alibaba stake for a fraction of that, many years ago — the company will likely use the funds to buy back its own shares. That stock has been caught in the mid-teens doldrums for quite a while.

A shareholder dividend is also being considered. It’s not clear if some of the cash will be held back for acquisitions by Yahoo, sources added, but it is unlikely.

As part of the deal, sources said, incentives have been put in place for Alibaba to move forward with a public offering, which sources stressed is without the contractual obligation or a time frame. Alibaba execs have already been publicly indicating such a direction recently, but this will put them more firmly on that path.

In return, Yahoo has agreed to sell the remaining quarter of its current holdings when that IPO does occur. It would then have an only 10 percent stake of Alibaba, which it could sell at any time after the IPO.

If finally struck, the transaction will finally bring to an end one of the more protracted and disputed relationships in the Internet world.

Once close, the pair have been wrangling over the large Yahoo ownership, which Alibaba CEO Jack Ma has been trying to dislodge in a variety of nice and not-so-nice ways. It has resulted in a number of very public disagreements.

That included a nasty back-and-forth over its Alipay unit with now-fired CEO Carol Bartz, threats of takeover of Yahoo with private equity firms and, more recently, making friendly with its just-ousted CEO, Scott Thompson.

Those talks with him in recent weeks, which included a visit to China by Thompson, led to the new deal, which was negotiated primarily between Yahoo’s CFO Tim Morse and legal head Mike Callahan and Ma and Alibaba’s Joe Tsai.

The talks continued even as Thompson was suddenly engulfed in a controversy over a fake computer science degree on his resume that quickly led to his departure from Yahoo on Sunday.

Ironically, the error was first discovered by activist shareholder Daniel Loeb, who will now vote on the deal as a newly named director of Yahoo, after successfully helping to oust Thompson.

He owns almost 6 percent of Yahoo, and is expected to approve the transaction.

But the final decision to approve the deal will be in the hands of a very new board of Yahoo, which has been drastically reshaped in recent weeks. It is meeting tomorrow and perhaps over the weekend to vote on it.

While the deal with Alibaba looks to be nearing an end, Yahoo’s talks to sell its 33 percent stake in Yahoo Japan is not part of this agreement. That’s due to what Thompson had called a “valuation gap,” which sources said is still an outstanding issue.

New interim CEO Ross Levinsohn has not been involved in the Alibaba deal in any significant way. But he certainly will benefit from its halo effect, if approved, especially given that it will likely boost Yahoo shares.

Next up for Levinsohn, who has just rejiggered Yahoo management again, other sources said, is an effort to settle the patent-infringement lawsuit with Facebook, and also to renegotiate its search deal with Microsoft.

And, oh yes, fix Yahoo’s rocky core-advertising business, which is still in distress and needs a major overhaul to push it back to growth.

But that, as they say, is yet another episode of Yahoo’s ongoing reality show.

Earlier today, Yahoo’s persistent thorn, activist shareholder Dan Loeb of Third Point poison-penned another letter to the board of the Silicon Valley Internet company, demanding that Yahoo fire its new CEO Scott Thompson, as well as director Patti Hart, over bizarre inaccuracies related to their academic achievements.

“Permitting Mr. Thompson and Ms. Hart to stay with the Company after apparently violating the Code of Ethics sends a message to all Yahoo! employees that a different set of rules applies at the top,” Loeb wrote.”[Yahoo must] terminate Mr. Thompson for cause immediately given his demonstrable unsuitability to remain Chief Executive Officer and a director of Yahoo! and accept the resignation of Ms. Hart for similar reasons.”

And while many across the blogosphere — including some very clever tweets — called for his head tout de suite, that’s just not going to happen.

At least for now, at this early point in a controversy over Yahoo filing legal documents that misrepresented Thompson’s long-ago degree from Stonehill College.

In a nutshell: Thompson does not have a computer science degree, as he had maintained he did in public bios for almost a decade, a falsehood that mysteriously seeped into documents Yahoo filed with the Securities and Exchange Commission.

That’s bad news for Yahoo, for sure, on many levels, but moving against Thompson at this moment is not likely to be the answer — for the short term, at least.

That’s due to many reasons, that I like to think of it as three hopelessly complex puzzles that need solving pronto.

The What-Did-Yahoo-Know-and-When-Did-It-Know-It Question

There is no question the first thing Yahoo’s board needs to do is a thorough investigation to determine how a borked bio could proliferate so widely and for so long.

Most importantly, Yahoo will have to reveal if Thompson actually gave them this incorrect information, as he aggressively lobbied for the then-open CEO job.

As I had previously reported several times, Thompson cold-emailed a Yahoo director — Intuit CEO Brad Smith, as it turns out — despite not being on the list of potential candidates. Thompson was then shuttled over to Hart, who was running the vetting process with the help of headhunting firm Heidrick & Struggles, and hired within weeks.

Oddly, sources said Thompson never filled out the required informational papers for the job, nor did Heidrick conduct the normal background check on him. Instead, another forensic firm Yahoo hired did the work.

If it turns out Thompson gave any of them the bad bio info, it would be quick curtains for him.

But if Yahoo’s board members obtained his info on their own, the next key query would be how no one at Yahoo — especially its legal and compliance staffers, as well as outside help — managed to catch the problem during the vetting of Thompson.

Here are some good questions to start with:

Who put a faux computer science degree on Thompson’s bio in the first place, why and when did it happen?

Where did Yahoo get the inaccurate information?

Who was in charge of checking Thompson’s academic record for Yahoo?

And, who checked the work of the checkers?

The problem is made more complicated, because correct information was easily available in the SEC filings of eBay for years, since Thompson was head of its PayPal payments unit.

While the resume information was indeed wrong on eBay’s Web site and on numerous bios of Thompson for years, how did eBay legally get it right while Yahoo did not?

That calls into question the expertise of the company, its directors and those they hired to make sure execs were completely on the up and up, a task they clearly failed at.

If rank incompetence is the reason, which it looks like it might be, expect certain board members and other Yahoo staffers to go, along with anyone who helped in the Thompson vetting, or lack thereof.

Unless, of course, the gang-that-couldn’t-shoot-straight actually did shoot straight and some one at Yahoo found out about the educational discrepancy before the new CEO was announced, but declined to fix it.

While sinister, such a scenario is not entirely implausible, given how much pressure Yahoo was under at the time to hire a CEO quickly, due to Loeb and his looming proxy fight.

If any evidence were to surface that this was so, it is curtains all around, which would rain the kind of disaster down on Yahoo’s Sunnyvale HQ that would make Loeb’s attacks look like a Nerf battle. Instead, it would be “The Hunger Games” — except that no one survives.

The Chaos-in-Sunnyvale Conundrum

Which brings us to the profound implications of Yahoo jacking its second CEO within six months.

While it’s easy to yell “Fire the CEO” on a crowded Twitter, it’s simply not so easy in practice.

How long did it take Yahoo’s lugubrious board to figure out Carol Bartz needed to go? A … long … time. (And, she had a CS degree!)

More to the point, Thompson — and his not-so-merry band of consultants from Boston Consulting Group and, this week, McKinsey & Company — has only just completed a massive layoff of 2,000 employees and a jarring restructuring of management.

He’s also in the early stages of rolling out a new and decidedly still-squishy strategic plan to top execs (also just this week), along with working on some other key initiatives.

That includes renegotiating its search partnership with Microsoft; noodling around on a possible deal with Google; contemplating the sale of a variety of assets; and — oh, yes — trying to take on social networking Godzilla Facebook over patent infringement.

Busy much?

But, most importantly, Thompson is now the umpteenth Yahoo CEO to be working on the never-ending talks with its Asian partners over selling back a piece of the company’s lucrative stake to them.

While Yahoo CFO Tim Morse and head lawyer Mike Callahan are the point men on the deal, the lack of CEO would be an issue in the now-proceeding again talks.

This is a sale that must — and I underscore must — get done and soon, giving Yahoo much-needed breathing room and a whole lot of cash to fork over to increasingly disgruntled shareholders.

So, expect Yahoo to try to milk that deal for all it’s worth in the coming week, in order to give the appearance, at least, of positive forward momentum.

And, like it or not, Thompson has to play a key role in it getting done.

Thus, the likelihood of wait-and-see over point-and-shoot on Thompson is higher than you might think.

That’s especially true given four members of the board are leaving within six weeks and have either or are in the process of being replaced by new members.

Then, Thompson will be their problem to solve.

Again, no small thing, since the old crew — led by feckless Chairman Roy Bostock — is not likely to want to end its appalling tenure with yet another disaster.

Such a move would further tarnish the legacy of its outgoing directors, although I am not sure how it could be any more sullied, given their consistent record of one bad decision after the next.

What do I really think? I think this cursed board will maintain its 100 percent score of doing the wrong thing at the right time.

It could be a different case with the new directors, of course, who all seem pretty sharp and not as easily impressed by a record of failure.

They will surely be monitoring Thompson carefully, as will employees, who have taken to internal message boards with a rage not seen in a while over the resume debacle.

Their morale might be one uncertainty impacting Thompson’s fate. If a lot of key employees continue to bolt Yahoo or those remaining more loudly express their disdain for the bio antics, the new directors might listen.

The Whatever-Loeb-Says-We-Won’t-Do-Till-Later Head-Scratcher

Which brings us back to Loeb, whose noisy campaign to grab seats on the Yahoo board has certainly hit home this week.

And, though Yahoo likes to ding him a lot, since he started his campaign of terribly entertaining investor terror, a lot of what he’s been calling for has happened.

That includes a major flushing of the board — with five longtime members, including co-founder Jerry Yang, going, going and gone.

In addition, Loeb brought pressure to slow down some questionable deals, from Yahoo’s PIPE dream to a tax-free spinoff in Asia in a deal only an accountant could love.

He’s also — though they try to deny it — got the Yahoo directors in the dangerous habit of reacting to him, rather than playing their own game.

While the Yahoo board has resisted any deal with Loeb (pictured here), blaming him for rejecting their kind offers of settlement, it is he who is setting the tone more than Yahoo.

And that tone is of alarm and trouble and chaos at Yahoo.

That’s not going to work to convince other Yahoo investors to back his cause — in fact, Loeb has a decidedly uphill battle to win his proxy challenge — he has still scored a direct win with the bio relevations.

So far, though, Loeb has not sunk Yahoo’s battleship, so it is unlikely the board will acquiesce to his latest demand of Thompson being fired by noon on Monday.

Maybe it will eventually, or maybe it will just scold Thompson or maybe it will do nothing at all.

All that is an unknown — a riddle, wrapped in a mystery, inside an enigma, with a lot of managerial incompetence thrown in. And that, most of all, is the sad definition of today’s Yahoo.

RELATED POSTS:

• Yahoo’s Parting With Thompson Will Be for “Cause” (a.k.a. CSLie)
• Ross Levinsohn’s Yahoo Plan: Back to the Future
• Here’s New Yahoo CEO’s First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)
• Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
• Meet the Man I Call “The Hair”: The Video Stylings of Yahoo’s Newest CEO Ross Levinsohn
• Will Thompson’s Ouster Mean a Yahoo-Facebook Patent Settlement Too?
• Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
• Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
• Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
• Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
• Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
• Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
• Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
• Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
• CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
• Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
• Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

According to sources close to the situation, Demand Media was deep into discussions with a private equity firm to complete a deal that would have taken the online content company private, nearing a price that was double its current value.

But Demand abandoned the effort this past week — which was born from an aggressive attempt by Boston-based Thomas H. Lee Partners to purchase the company for a price of up to $1.2 billion. That was due to a number of challenges, including complications related to its financing and the ability to retain executives in its aftermath.

The move on Demand by private investors is perhaps no surprise, and is part of a wider trend related to some Internet companies whose stocks have a depressed value relative to the worth of their assets.

Among companies having been and also being evaluated by private equity firms, whose business it is to turned the undervalued into a goldmine: Yahoo and AOL.

And also Demand, which is now worth only $605 million, a market cap that is off 65 percent since it went public in February 2011. Shares now trade at $7.25 each.

That depressed share price has been due to a number of issues, most especially changes to Google’s search algorithm to improve results. Called Panda, the changes at the search giant — a critical partner of Demand’s — has cut traffic to its major content sites and also called into question its ability to monetize its scaled editorial efforts.

Such a situation is nearly irresistible to PE firms — in this case, Lee, which approached Demand.

Several sources said that the board threw out a hefty number that it assumed would shut down any interest and the pair began talking with an initial offer to take the company private at $11.28 a share.

That equals close to $1 billion for Demand, which also has more than $100 million in cash. But sources said Lee and Demand also discussed the addition of a large loan as part of the ongoing discussions, for possible acquisitions related to a content roll-up strategy it had, which would bring the total up to $1.2 billion.

One source underscored that the board of the Santa Monica, Calif., company had no interest or intention to sell the business, but that the premium was large enough that it engaged.

The deal from Lee, which also included a strategy of splitting up the content arm from Demand’s lucrative domain-registar business.

There were also large cash-out provisions for major shareholders, as well as for CEO and co-founder Richard Rosenblatt.

Thus, the two sides engaged intensely in the last several weeks in crafting an agreement, although the devil would prove to be in the details.

One big issue is that taking Demand private was still a big financial commitment for Lee — which tried to engage some of its limited partners in the transaction — as well as other investors, including Silicon Valley’s Marc Andreessen.

That proved harder than Lee thought, said sources, with some balking at the firm’s ability to make a big enough score on the possible turnaround.

“It was hoped it would be a Skype situation, but there were worries,” said one source, referring to the blockbuster sale of the Internet telephony company by private investors to Microsoft for $8.5 billion last year. That deal was widely considered a PE home run, given the excessive premium paid for it.

Demand’s challenges increasingly worried the firm as it moved forward, sources said, causing it to reevaluate its earlier bid several times.

Also a worry: Retaining major talent, including Rosenblatt and others, after they sold large chunks of their equity.

After Lee asked for more time to complete the financing, Demand ended the talks last week.

Another source, as is typical in these endings, said it was the Lee that walked away (who knows and, really, who cares — both sides were engaged seriously).

One thing was true: “Demand was definitely at the altar, but it did not get to the vows,” said one source.

Another source noted that the board also determined that Demand’s situation was improving, and that new trends are showing that the bottom might be been reached. The company reports its first-quarter earnings on May 8, which is expected to show some traction related to its many challenges.

“There is nothing Lee could do that Demand could not do for itself,” said one person. “So throwing in the towel seemed premature for now.”

Lee declined to comment, as did Demand.

According to sources close to the situation, new Yahoo CEO Scott Thompson is meeting with the two private equity firms that had made previous partial investment overtures to the Silicon Valley Internet company.

While those deals are now tabled, sources said that Thompson and the Yahoo board still wants to engage investors — Silver Lake and TPG Capital — in discussions about how to best turn around Yahoo.

Thus, sources said, Thompson was interested in meeting with the firms — as well as others involved, such as VC Marc Andreessen, who had been working with Silver Lake — in order to discuss their ideas and get up to speed on them.

And, of course, keep the discussions alive to see if there is any kind of different deal to be done in the future.

That’s after, of course, Yahoo completes its complex negotiations with its Asian partners — Alibaba Group and SoftBank — over selling off parts of its own stakes there.

While Yahoo’s success in resolving Asia is not assured, this transaction was a key part of proposals for a PIPE — Private Investment in Public Equity — deal that both Silver Lake and TPG had made.

But, after shareholders looked askance on such a deal due to price and other issues, Yahoo decided to negotiate on its own and picked a new CEO.

Still, in a have-your-cake-and-eat-it-too move, the company leadership also did not want to close the door on the PE firms (and their money and expertise). completely.

That’s especially true, since the distinct possibility of a proxy fight from activist Yahoo investor Daniel Loeb is now hovering over the company’s neck.

Both Loeb and Yahoo are scrambling to prep for the potential battle. Loeb is trying to assemble a slate of alternate directors, and shoring up other major Yahoo shareholders as allies, while Yahoo is moving to shed some directors while also adding new ones.

Hence, the meetings with PE firms to keep the proverbial ball rolling, which presents at least the facade that the company is intent on turning the core parts of Yahoo around by any means possible.

Sources close to the PE firms remain dubious, with both feeling burned by the last process.

“I’m not sure anything will come of this, and the way Yahoo conducted the last talks was not encouraging,” said one source. “But it does not cost anything to keep listening.”

Here’s a handy helper for those following the fate of the Hulu premium online video service, whose noisy efforts to sell itself have gotten a lot of attention of late:

“In preliminary talks” = “hawking itself to one of a half dozen big moneybag tech companies who will visit with Hulu’s bankers and management to see its presentation at Morgan Stanley’s office in Century City in Los Angeles.”

Last Friday, for example, that meant a look-see for Microsoft execs, to show the software giant the story of how paying top dollar for the popular Hulu would be a great investment.

This week, sources said, Yahoo will get the expected gander at the books too, among the other companies targeted by Hulu as part of a sales process in its very early stages.

Among those companies on the short list, sources said, along with Microsoft and Yahoo are: Google, Verizon, AT&T and Amazon.

None of these should come as a surprise, since they all have a big interest in the digital distribution of content business.

Google is perhaps the most interesting and difficult of the group, due to both its massive YouTube unit and the even more massive interest by government regulators about its disturbing massiveness.

Amazon is the company that seems most suited as a Hulu buyer, since it already makes its business selling and distributing content. In addition, Hulu CEO Jason Kilar was a former exec — bringing a certain level of familiarity and presumably much less of the grumpy disgruntlement that he experienced with Hulu’s current media giant owners.

Microsoft seems like the longest shot and least enthusiastic, although it certainly could afford it.

As for Yahoo: Good lord, it needs something sexy to tell weary investors.

Not in the initial round, but other possible acquirers Hulu is targeting: Facebook, Netflix, Samsung and Liberty Media.

And definitely not among those kicking the tires: Disney, News Corp. and Comcast, the trio of partners who own Hulu, along with Providence Equity Partners.

The big question, of course, is whether media-focused Apple — a notorious buyer of almost nothing — would be interested in Hulu.

These blind dates with the best possible buyers will presumably give each insight into Hulu’s business and give Hulu information on what they are looking for.

Sources who have heard the pitch said Hulu is positioning itself as an inevitable competitor to cable, which seems an odd position to take, unless it can get regular access to the kind of top-drawer content that consumers want.

And that will be the most important issue for anyone buying Hulu: The time and terms of rights to the television and movie content on the site, which has been a critical part of its success.

Buyers I have interviewed said Hulu has to offer at least an 18-month license for its content and a pile of rights to hit shows to differentiate itself from competitors.

As Peter Kafka wrote, Hulu buyers would indeed get exclusive content, but with strings attached.

He also noted that the latest content licenses for Hulu’s owner/partners — Disney’s ABC and News Corp.’s Fox — have recently been completed, deals that will stay intact if Hulu is sold.

Unlike Netflix, which has had to pay top dollar for a small pile of premium content while deftly using a large archive of older content to attract subscribers, Hulu’s success has had a lot to do with more access to popular current shows offered by its media giant owners.

Those shows include TV hits such as “The Office” and “Glee.”

That access has become a point of contention with those owners, who have differed with Hulu management about what comes next for the mostly advertising-supported site, even though its slick product has been a clear hit with consumers.

Of course, some speculate that Hulu might not sell at all, just as it never went public as it had said it might do previously. In that case, it will be interesting to see what will become of Hulu once the music stops.

(And, if anyone would like to email me the Hulu presentation or notes on it, please do, so I can formulate a bid myself!)

But, until this deal churns slowly, leakily and loudly forward — let’s enjoy some apt Hulu content. As usual, the fun version of ABBA’s “Dancing Queen” by the kids from “Glee” was not available on the site.

Thus, I selected frequent “Glee” guest star Gwyneth Paltrow belting out Joan Jett’s “Do You Wanna Touch Me” on the show, as a good alternate metaphor for the sales process:

TweetDeck is one of the add-on programs that help Twitter users view and manage short messages carried by the service, which are known as tweets.

A Twitter spokesman declined to comment. TweetDeck’s chief executive, Iain Dodsworth, didn’t respond to requests for comment.

Read the rest of this post on the original site »

While no one inside or outside Myspace owner News Corp. expects fireworks and giant piles of money, the tire-kicking for the long-troubled social-networking-turned-entertainment site actually starts Wednesday.

That’s when about a dozen interested parties will finally get a walk-through of the books and more by management and the serious talks begin.

But, said several sources, despite a variety of reports of various interested buyers, no deal for the Beverly Hills, Calif.-based Myspace is imminent with any one of them.

Instead, most expect some kind of outcome within two weeks at the earliest.

Among the possibilities is anything from an outright sale to partnership that continues to involve News Corp., which has engaged Allen & Co. to conduct the sad proceedings.

Among those in the fray are, as has been reported, music video network Vevo, owned by several media giants. It is the most prominent strategic suitor for Myspace.

But talks with Vevo are preliminary, as are all others.

In fact, most of the others interested are as expected: moneybag private equity players, such as Providence Equity Partners and Silver Lake Partners. Both have been in discussions with News Corp. in earlier efforts to offload Myspace.

Interestingly, Criterion Capital Partners, which bought AOL’s Bebo social networking site for less than $10 million last June, is not in the bidding as yet.

Neither is Zynga, the San Francisco casual gaming start-up. Various stories had rumored of its interest in Myspace, but they are inaccurate. In addition, neither AOL nor Yahoo seem likely bidders either.

And it goes without saying that the Silicon Valley social networking site that did Myspace in–Facebook–is also not a buyer. So too Google, which–back in the headier days–handed Myspace a fortune as part of an ill-advised advertising deal.

In any case, whoever buys Myspace needs a lot of patience, which seems to have run out at News Corp., where top execs take turns bashing it to shareholders.

That’s no surprise. After a laudable though glacial redesign as a music and entertainment hub last fall, traffic has declined 44 percent in a recent month from a year ago, to 37.7 million unique visitors in the U.S.

Worse still, the News Corp. unit that houses Myspace showed an operating loss of $156 million in the recent quarter, mostly related to a severe drop-off of advertising revenue at the site.

That plunge in fortunes will surely have an impact on the price buyers are willing to pay for the once iconic brand.

(Full disclosure: News Corp. also owns Dow Jones, which owns this site.)

Flixster–the popular social movie site whose brands include the Rotten Tomatoes premium reviews site, as well as BuddyTV–is in early acquisition talks with several suitors, including Yahoo, said sources close to the situation.

The price being discussed for the San Francisco-based start-up is between $60 million and $90 million, said several sources, in talks that are “substantive.”

Nonetheless, any acquisition negotiations could always fail. In fact, Flixster held advanced discussions in late 2007 with IAC/InterActiveCorp.

Along with Yahoo, which is interested in bringing in a strong team to bolster the entertainment offerings of the Silicon Valley Internet portal, sources said several media giants are also eyeing Flixster in order to strengthen their ties to entertainment consumers. Likely candidates in this regard include Disney and Warner Bros.

Interestingly, one of Flixster’s big shareholders is News Corp., which traded its Rotten Tomatoes unit for a 20 percent stake in the combined entity a little over a year ago.

But its minority stake gives News Corp. little influence over Flixster’s fate, although its IGN gaming unit head Roy Bahat is on the Flixster board. News Corp.–which has been shedding Web properties, such as its current effort to sell MySpace–is not bidding for Flixster.

But the interest in the site by Yahoo and others is obvious.

Flixster has attracted a huge online audience, which trades all kinds of recommendations, ratings, news and even post user-generated movie reviews on the Web site and via widgets on social networking sites, mostly on Facebook. Its recent mobile app efforts have been successful.

Co-founded in 2006 by CEO Joe Greenstein and CTO Saran Chari, Flixster has raised $7 million in funding from Lightspeed Venture Partners and Pinnacle Ventures, as well as garnering angel investments, such as from Silicon Valley entrepreneur and LinkedIn founder Reid Hoffman.

The combination with Rotten Tomatoes and its more robust Web presence made a lot of sense. It features mostly premium content, including professional reviews, trailer videos and news.

The site is famous for its clever fresh and rotten tomato rating system for movies.

A Yahoo spokeswoman declined to comment and I have not received a response from emails sent to Greenstein.

Until he does, here’s my video interview with Greenstein, Chari and COO Steve Polsky, in which they talked about the deal to combine Flixster with Rotten Tomatoes:

]]> http://allthingsd.com/20110316/100-percent-fresh-exclusive-flixsterrotten-tomatoes-in-acquisition-talks-with-yahoo-and-others/feed/ 4 http://allthingsd.com/20110207/google-eu-reportedly-in-antitrust-settlement-talks/ http://allthingsd.com/20110207/google-eu-reportedly-in-antitrust-settlement-talks/#comments Mon, 07 Feb 2011 18:32:53 +0000 Voices http://voices.allthingsd.com/?p=35988 Google has begun preliminary talks with European Union regulators in an effort to resolve an antitrust investigation that began in November, according to a source cited by Reuters today. The probe was launched after competitors charged that Google was using its dominant position in search to favor its own services in its result rankings.

]]> http://allthingsd.com/20110207/google-eu-reportedly-in-antitrust-settlement-talks/feed/ 0 http://allthingsd.com/20101203/google-talks-with-groupon-are-ended-without-deal/ http://allthingsd.com/20101203/google-talks-with-groupon-are-ended-without-deal/#comments Sat, 04 Dec 2010 02:12:11 +0000 Amir Efrati, Gina Chon and Geoffrey A. Fowler http://voices.allthingsd.com/?p=33546 Google Inc.’s multibillion-dollar bid to acquire local deals site Groupon Inc. ended Friday as the two sides broke off talks, according to a person familiar with the matter.

Negotiations between the two companies heated up over the past week but Groupon’s board, many of whom are investors, was divided on whether to accept Google’s offer.

The company continued to consider remaining independent and pursuing an IPO in the future, people familiar with the matter have said.

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]]> http://allthingsd.com/20101203/google-talks-with-groupon-are-ended-without-deal/feed/ 0 http://allthingsd.com/20101119/google-turns-its-local-eyes-to-groupon-but-who-else-could-enter-bidding/ http://allthingsd.com/20101119/google-turns-its-local-eyes-to-groupon-but-who-else-could-enter-bidding/#comments Fri, 19 Nov 2010 08:38:06 +0000 Kara Swisher http://kara.allthingsd.com/?p=37521

According to multiple sources close to the situation, Google is in discussions with local deals powerhouse Groupon about buying it.

Without making the requisite joke about the deal of the day, sources said the price being considered is certainly no discount–well above the $2 billion to $3 billion that Yahoo offered Groupon in acquisition talks that took place earlier this year.

But sources cautioned that the talks are not complete, and could also end up without any result, as the Yahoo discussions did.

In an email, a Google spokesperson said with some style: “Per usual, we don’t comment on rumor or speculation. If we did we’d be busy 24/7!”

A Groupon spokesperson was also sassy, noting: “Thanks for the heads-up!”

Still, the company appears to be engaged in a pattern of shopping itself around, via its bankers Allen & Co., even though Groupon investors have expressed a desire to stay independent many times.

But could there be other interested parties poking around, given the explosive revenue growth of Groupon–whose revenues are reportedly upward of $50 million a month–in the huge local retail market?

Sources said only three could pay such a high price: Microsoft, Amazon and, perhaps the most logical buyer, eBay.

Facebook is another company that could be interested, of course, although this would be a sizable purchase in both cost and also staff for the social networking giant, which has fewer employees than Groupon.

As does Google, all–except perhaps Facebook, which is not public yet–have more than enough cash reserves, as well as stock, to pay up for one of the more promising start-ups in a lucrative arena.

That would be local commerce. Currently, despite a plethora of clones, Groupon dominates socially fueled couponing across cities globally.

Owning the hot space around local purchasing and consumer information, combined with the social element, would be a tasty treat for Google.

The Silicon Valley search giant has struggled to deliver social tools to users, even as Facebook has morphed into a potent rival.

Google had looked at social reviews site Yelp for purchase previously, but that deal fell apart.

It has been introducing various local advertising and commerce efforts, efforts that would be turbocharged given Groupon’s quick progress.

In April, Groupon garnered a valuation of well above $1 billion in a massive venture funding.

It has used that money to buy up companies in the U.S. and internationally, trying to solidify itself as the major player in the marketplace.

If Google were to complete a deal to buy Groupon, it would have echoes of its purchase of YouTube in 2006 for $1.6 billion.

Many felt it a high price at the time, but it looks cheap today given how the site almost completely dominates Web video.

A purchase this size would also likely require bankers. Google’s favored one is Morgan Stanley.

But there is one major issue in a possible Google purchase of Groupon: Even more regulatory scrutiny by the federal government over its power online.

Google narrowly missed getting approval for its $750 million purchase of mobile advertising start-up AdMob.

And it is currently under fire from numerous critics for its proposed purchase of huge flight data firm ITA Software for $700 million.

Those opposed to the acquisition, on antitrust grounds, contend that Google would control travel search in a way that would invite abuse.

Having Groupon would garner Google even more powerful pricing information from both customers and merchants across the globe.

Stay tuned, but check out this video interview I did with Groupon founder and CEO Andrew Mason this summer in Vancouver, where I asked him specifically about Google’s interest (actually, I suggested he mug Google co-founder Larry Page):

Please see this disclosure related to me and Google.

]]> http://allthingsd.com/20101119/google-turns-its-local-eyes-to-groupon-but-who-else-could-enter-bidding/feed/ 16 http://allthingsd.com/20100916/exclusive-myspace-and-google-zero-in-on-renewing-realistic-search-deal/ http://allthingsd.com/20100916/exclusive-myspace-and-google-zero-in-on-renewing-realistic-search-deal/#comments Thu, 16 Sep 2010 08:45:31 +0000 Kara Swisher http://kara.allthingsd.com/?p=33792

After what started out as one of Web 2.0′s most frothy deals and soon became a contentious relationship, several sources said that Google and MySpace are moving close to signing a new agreement, in which the search giant would remain the provider of search and online advertising technology for the social networking site.

But, said sources, this deal is a lot different from the one signed four years back when the News Corp. (NWS) unit was flying high and Google (GOOG) forked over $900 million in guaranteed payments to stave off a competitive effort from Microsoft (MSFT).

This time, because MySpace’s traffic has declined so precipitously over these years, the new deal has no giant guaranteed payments and not even any of the bells and whistles the recent renewed and expanded search deal AOL (AOL) struck with Google has.

“It is a different time and MySpace is in a much different place,” said one source close to the situation. “This is a realistic deal.”

Sources stressed the deal with Google was not complete, although it could be struck within weeks.

Sources said Microsoft (MSFT), which had been in talks with MySpace too, has largely dropped out, although it certainly could put forward another offer at any time.

But, said sources, the search volume from MySpace is not as valuable to Microsoft’s Bing search service and it would have to pay MySpace more since it does not monetize as well as Google.

Another bidder, Yahoo (YHOO), sources said, was not considered a factor in the competition, although it could also still make a better bid.

Google and MySpace continued their talks about renewing the deal after their original contract ended at the end of July, agreeing to two one-month extensions.

The hope is, if struck, a new Google deal will perform better, given MySpace will launch a soup-to-nuts renovation of its site, codenamed Futura, in mid-October.

Before that, the Beverly Hills, Calif., company, which has undergone much management turmoil over the last year, has been dribbling out some of these new features.

That has included new profiles and also the ability to synch status updates on its site with Facebook.

Yes, the very social networking giant whose total decimation of MySpace in the consumer space has been at the heart of its problems in making its original Google deal as lucrative as was once hoped.

MySpace declined to comment on the status of its negotiations, and Google has not yet returned a query about the deal discussions.

Please see this disclosure related to me and Google.

]]> http://allthingsd.com/20100916/exclusive-myspace-and-google-zero-in-on-renewing-realistic-search-deal/feed/ 0 http://allthingsd.com/20100629/location-location-location-foursquare-nabs-20-million-in-vc-funding-at-95-million-pre-money-valuation-plus-blog-posts-of-course/ http://allthingsd.com/20100629/location-location-location-foursquare-nabs-20-million-in-vc-funding-at-95-million-pre-money-valuation-plus-blog-posts-of-course/#comments Tue, 29 Jun 2010 21:45:02 +0000 Kara Swisher http://kara.allthingsd.com/?p=30010

After a very long and decidedly strange funding journey, Foursquare has finally officially landed a new round of $20 million in venture funding, with Silicon Valley’s Andreessen Horowitz leading the new investment.

BoomTown reported last week that the new deal, which puts Foursquare at $95 million pre-money valuation, was in the bag.

Interestingly, it is only the second round for the New York-based social location start-up and includes its current investors, Union Square Ventures and O’Reilly AlphaTech Ventures.

Ironically, Andreessen Horowitz had walked away from earlier investment talks because of the excessive hype and indecision around the race to fund Foursquare.

But in an interview this afternoon with me, partner Ben Horowitz said that once Foursquare became firmer in its determination to build the company rather than selling it, his firm was all in.

“Basically, Foursquare made an important decision on the future of their company to build it into a really significant, independent business,” said Horowitz. “It’s a big step and we’re thrilled to back them in doing that.”

Indeed, the wrapping-up of what has been a very convoluted funding process comes after a series of missteps and switchbacks over what’s next for Foursquare, which allows users to “check in” from various places.

Among the twists: Serious but failed acquisition talks with both Facebook and Yahoo (YHOO), as well as a messy beauty pageant of other big VC firms, mostly in Silicon Valley, including Khosla Ventures, Accel Partners and Institutional Venture Partners.

The overhyped interest is because Foursquare and many others like it have seen strong growth and much innovation, although it is not clear yet if that will translate into solid businesses.

Still, Foursquare hit one million users in April and is now approaching 1.8 million, adding about 15,000 users per day. It uses a variety of game techniques and other features, such as the awarding of digital badges, to hold user interest.

And though small, it is trying to work with major brands, most notably Starbucks (SBUX), on a variety of marketing deals.

That requires money, especially given increased competition as everyone girds to race ahead first.

Foursquare’s original $1.35 million funding was raised from Union Square Ventures and O’Reilly AlphaTech Ventures, as well as some well-known angel investors, such as Twitter co-founder Jack Dorsey, Kevin Rose of Digg and Ron Conway.

Foursquare’s current investors also recently gave it a bridge investment.

Thus, Foursquare needed bigger funding, a process that soon became unusually complicated, in part because of indecision by CEO Dennis Crowley and in part because of some very public deal-making.

In fact, that’s what initially scotched very advanced funding talks between Foursquare and Andreessen Horowitz. The high-profile Silicon Valley firm–helmed by Internet icon Marc Andreessen and his longtime business partner, Horowitz–smacked Foursquare hard after those discussions and talks with other firms were leaked to the media.

In an exclusive interview with me in April, Horowitz took the unusual step of talking publicly about VC frustrations that are typical in deals around hot companies.

At the time, Horowitz acted as if he were checking out of Foursquare.

“We withdrew our funding offer to Foursquare and we are out,” he said in an interview with BoomTown then. “This is playing out too much in public and clearly someone has an interesting agenda here, so this is not something we want to participate in.”

At the same time, Horowitz left the door open. “If the process was changed, we still like the company,” he said then. “But since it has been long and undefined, it is prone to manipulation.”

That sentiment obviously changed, said Horowitz.

“A lot of the problems we were worried about were the result of their ambivalence on what to do, and so we were almost a distraction until they could decide,” he said. “Since they got clarity, it has been a very efficient process.”

Horowitz will become a Foursquare board observer and what he characterizes as a “CEO coach” to Crowley.

But he stressed that so far, the leadership of Foursquare was doing very well.

“I think they are clearly best of breed and very far of ahead of everyone else in what is a very complex business to get right,” Horowitz said. “There are definitely competitors large and small, but this company has a lot of experience and data atop a big vision.”

We’ll see, of course! And as hard a time as I have given him, Crowley–who sold his last company, Dodgeball, to Google (GOOG), which ended not so well–is definitely on another roll.

Until then, here are the blog posts by Horowitz and Crowley on the deal:

Why Andreessen Horowitz Invested in Foursquare

They say he’s a grinder
fly ass rhyma’
With a CEO’s mind bra’
–Kinfolk Kia Shine

Today we are extremely excited to announce that we are investing in Foursquare, a service that mixes social, locative, and gaming elements to encourage people to explore cities in which they live.

Here are the three reasons we invested.

1. A great Founder/CEO: Dennis Crowley

We prefer founding CEOs. In particular, we think the keeper of the product vision should run the company whenever possible because the toughest and most important decisions in technology companies are always about product strategy.

The only thing better than the CEO being the keeper of the vision is the CEO being the creator of the vision. In Foursquare’s case, Dennis not only created the vision for the company, but for the entire product category. Beyond that, he is very clearly the thought leader in the market. This is not at all surprising as he has been working on the problem for a decade and has highly refined his thinking through that period.

As importantly, Dennis embodies the kind of leadership that I described in Notes on Leadership. He’s the kind of leader that great technical minds will be excited to follow: visionary, righteous, and competent. I am really excited to work with Dennis to help him on his path from being a great leader to a great Chief Executive of an incredibly important company.

2. A killer product

When you look at the numbers, you’ll see that Foursquare is growing faster than Twitter did at this stage. In particular, their growth has been explosive over the past few months–they just hit 1 million users in April and now they’re approaching 1.8 million, adding around 15,000 users per day. It’s easy to see that people absolutely love the product. Less obvious to the competitors and pundits are the reasons why people love the product so much. I often hear people attribute Foursquare’s success entirely to check-ins or other easy-to-understand product features. It reminds me of the early days of Zynga when people thought the secret sauce behind Mafia Wars and Farmville were that those games were web-based.

It turns out Zynga games are wildly successful because Zynga has mastered the art of connecting friends via games–and they work incredibly hard behind the scenes to deliver what at face value looks very easy. How many times have you heard someone say, “I could have built Farmville in a weekend”?

Foursquare is very similar in that a lot of hard work behind the scenes goes into delivering a product that users love. Dennis and team have identified over a dozen different dimensions of the Foursquare product that must interact with each other in precisely optimal ways to achieve user delight. Years and years of research and sweat equity went into cracking the code, and the results are magical.

3. A gigantic market

At a macro level, over 4.6B people have mobile phones and there are 1.7B people on the Internet. Already, over 200M people worldwide have smart phones and that number is headed north fast. Foursquare might not win the entire smart phone market (some people don’t even like to leave their house), but it will capture a huge portion of it because it’s incredibly fun and addicting.

As importantly, we are very excited about Foursquare’s ability to make money in a way where all parties win: users, merchants, venue owners, brand advertisers, and more. In fact, users have been so excited about the product that they’ve actually been signing up local businesses to run promotions for Foursquare’s mayors and active users. This natural enthusiasm is happening even before Foursquare has added specific product features to help businesses run campaigns. As a result, major brands such as The Wall Street Journal, The New York Times, Zagat, Bravo TV, Starbucks, C-SPAN, Marc Jacobs and over 10,000 businesses are currently working with Foursquare to build customer loyalty and drive traffic. Not many companies have their users turn into their sales force, and it’s definitely a good sign that this is happening around Foursquare.

We are excited to be on this journey with our good friends at Foursquare.

We’re just getting started…

Hey all–

It’s been quite the year for foursquare. Last year at this time, Naveen and I–tired of working around my kitchen table–borrowed a desk from our friends at Curbed.com and Hard Candy Shell. Two months later we brought on our first hire (Harry!) and a few weeks after closed on our first round of financing: $1.35m from Union Square Ventures, O’Reilly AlphaTech Ventures and a handful of angels. Back then, our office looked like this.

Fast forward a year: We’re now 27 people strong. We can’t fit any more desks or chairs in our office so we’re borrowing cubes from our neighbors downstairs. We’re about to hit 1.8 million users and we’re seeing Super Swarms happen all over the world (Indonesia, you crazy!). In short, it’s been an amazing year for foursquare. A huge thank you to anyone that’s ever unlocked a Newbie badge!

And with that, we’re excited to announce that we’ve raised another round of capital. Today we closed on a $20m Series B round with Union Square Ventures, O’Reilly AlphaTech Ventures and our newest partner, Andreessen Horowitz. We’re thrilled to have the continued support of our original investors and additional support and expertise from the team at Andreessen Horowitz.

The two big names behind Andreessen Horowitz–Marc Andreessen and Ben Horowitz–are each legends in Silicon Valley. They know better than anyone how to transform startups into successful organizations. As we continue to rapidly expand to take advantage of the opportunities in front of us, Ben and Marc’s expertise in growing companies will be invaluable.

With this new round of financing, our main priority will be to expand our organization to supplement the amazing core team we’ve assembled already (know any great engineers? send them our way!). We’re hoping to build a world-class engineering organization, based primarily in our headquarters in the New York City to help us develop the next generation of mobile + social + local products that will excite our users and provide unique value for local merchants. The new investment capital will also help fund the infrastructure needed to house our team (we’re finally getting a new office!) and support our growing audience of nearly 2m users.

It’s been a crazy year for us and we’re expecting the next 12 months to be even more of an adventure. Look forward to more great product from us soon…we’re really just getting started.

–@dens and the rest of team foursquare

]]> http://allthingsd.com/20100629/location-location-location-foursquare-nabs-20-million-in-vc-funding-at-95-million-pre-money-valuation-plus-blog-posts-of-course/feed/ 4 http://allthingsd.com/20100528/microsoft-talking-to-apple-about-being-a-search-option-on-the-iphone-not-google-replacement/ http://allthingsd.com/20100528/microsoft-talking-to-apple-about-being-a-search-option-on-the-iphone-not-google-replacement/#comments Fri, 28 May 2010 23:52:24 +0000 Kara Swisher http://kara.allthingsd.com/?p=29008

Correcting yet another too-early rumor, sources tell BoomTown that–as has been previously reported many times in many places–Microsoft and Apple are in long-term talks about adding the Bing search service as a prominent option on the iPhone and not as a replacement of Google.

Currently, Google (GOOG) is the default search on the popular mobile device, although you can easily go into its settings and switch the search option to Yahoo (YHOO). Few consumers do, though.

Microsoft (MSFT) has been angling to be added to the search options for a long time, but has wanted to do so in a way that makes the choice more visible.

And it is probably a good idea to give users of the iPhone more choice in a wide range of services.

But, whether Apple would make Microsoft’s Bing the default or whether it would simply allow iPhone users more of a choice among search services is unclear.

In addition, Microsoft wants to make its Bing mapping more integrated with the Apple (AAPL) iPhone.

“Being an option is what’s on the table,” said one source briefed on the talks. “That’s all for now, although who knows where it could lead?”

But, cautioned several sources, talks are not complete, even though the software giant is eager to be able to announce such a deal at Apple’s upcoming developers conference on June 7.

Microsoft execs have been nervous about completing such a deal, especially because Apple is notoriously secretive and is known to end talks due to leaks.

That said, relations between Apple and Google have become increasingly tense, as their product offerings–especially in the mobile arena–have become competitive.

Google was one of Apple’s principal partners on the iPhone upon its launch and its services are prominent on the device.

But, as the device has evolved, sources say Apple has been considering a number of search options, as well as mapping, for the iPhone.

Google execs have been anticipating this, of course, especially as the search giant has pushed development of its Android mobile operating system.

In fact, a recent developers conference that Google had in San Francisco, its top execs spent a lot of time publicly attacking Apple.

Thus, it is likely that its top-level placement on the iPhone and other Apple products will diminish.

While being an option is not the same as completely replacing Google, it would give Bing a well-known platform to show off its technology to consumers.

Microsoft would like to hip-check Google off of the iPhone, of course.

But like rumors that it would pay News Corp. (NWS) to “de-index” its content from Google and display it prominently on Bing, the notion is premature.

]]> http://allthingsd.com/20100528/microsoft-talking-to-apple-about-being-a-search-option-on-the-iphone-not-google-replacement/feed/ 10 http://allthingsd.com/20100423/welcome-to-the-hotel-california-heres-whats-really-happening-in-the-foursquare-pig-pile/ http://allthingsd.com/20100423/welcome-to-the-hotel-california-heres-whats-really-happening-in-the-foursquare-pig-pile/#comments Fri, 23 Apr 2010 08:37:37 +0000 Kara Swisher http://kara.allthingsd.com/?p=27556

No, Facebook is not in serious talks to buy Foursquare. Yet.

No, Microsoft is not poised to snap up the social location start-up, beyond a cursory should-we-look query to itself. Yet.

No, there is no longer a crazy bidding war going on among major venture players in Silicon Valley, all waiting with bated breath for Foursquare founder and CEO Dennis Crowley to make a decision about which of them he will deign to take a big pile of money from.

In fact, Andreessen Horowitz partner Ben Horowitz was entirely correct when he told BoomTown in an interview earlier this week that his firm was dropping out of the race to fund the company:

“This is playing out too much in public and clearly someone has an interesting agenda here, so this is not something we want to participate in.”

Interesting indeed, although cloddish is probably a better word for what the simple process of deciding on funding versus selling has turned into.

New York-based Foursquare, which hit one million users yesterday and is unprofitable, lets its users “check in” from a variety of locations.

It’s an innovative and entertaining concept and a lot of fun, unless you are among those trying to do a deal with Foursquare.

From VCs to Facebook to Yahoo (YHOO)–the only serious bid to acquire Foursquare so far–sources close to every single player mentioned in the hubbub around the start-up expressed stupefaction about the confusion Crowley’s endless Hamlet act has resulted in.

And, in no small measure, annoyance too.

“It’s hard to make rivals all agree on one thing,” said one person close to the situation. “But this just became a pig pile.”

Indeed, that was the impetus for Horowitz speaking on the record about the experience of dealing with Foursquare, a move that was unprecedented.

“If the process was changed, we still like the company,” said Horowitz. “But since it has been long and undefined, it is prone to manipulation.”

While some have suggested that this was just sour grapes on the part of Andreessen Horowitz because Foursquare decided to pass on a lower funding offer it made, others involved–including rival VCs–applauded the move.

“Foursquare is being just as vague and unclear to us, which I think means they don’t know what they want,” said one VC, who has been considering funding it. “No one minds losing out to someone else, as much as feeling like you’re being played.”

The game got another boost today by rumors that Facebook is intently interested in buying Foursquare and delayed its announcement of location features at its f8 conference Wednesday because the social networking site did not want to scotch the impending deal.

Actually, no.

What is true is that Crowley has been to visit Facebook execs, including CEO Mark Zuckerberg, and there were only cursory discussions about a range of possible ways to work together, including a plan to federate third-party location services at the social networking giant.

Also, why not meet?

“It’s was a free look,” said one person with knowledge of the chitchat, the kind that happen all the time between Facebook and companies. “You always say yes when people want to talk, because you can learn a lot.”

As to a purchase: Unlikely at the price of $100 million-plus that Yahoo offered, if ever.

“Yahoo needs a solution in the mobile location and local space, because they have nothing,” said another source of the build-or-buy decision. “Facebook has all the tools it needs, as well as 500 million users used to updating their statuses, so what Foursquare is doing is not hard to replicate.”

As for Microsoft (MSFT), sources said, it, as well as companies like Nokia (NOK), simply have had their interest piqued by all the noise surrounding Foursquare.

That is also typical around hot start-ups, and perhaps more so with Microsoft, since it recently signed a deal with Foursquare to integrate its customer data with the Bing search service’s map apps.

So what’s left? Well, Silicon Valley VCs, of course, who are always interested in a deal.

Despite negligible revenue, Foursquare raised $1.35 million last August, valuing it at $6 million.

Foursquare’s current VCs include O’Reilly AlphaTech Ventures and Union Square Ventures, as well as a spate of well-known angel investors.

New VC valuations have hovered from $50 million to $80 million.

But both Accel Partners and Redpoint Ventures, sources said, do not have active talks going on with Foursquare.

One wild card: Free-spending Russian moneybags Digital Sky Technologies, which has already sunk copious funds into Facebook and games powerhouse Zynga.

For certain, after Andreessen Horowitz pulled out, the last one standing seems to be Gideon Yu of Khosla Ventures.

And while the eager firm has made an offer, sources said, it has yet to hear back from Foursquare, which is taking its sweet time mulling things over, which can’t make Yu happy either.

In other words, mangling the old Eagles song, “Hotel California”: You can check in any time you like, but you can never leave.

So while Crowley searches for the most lucrative exit, let’s enjoy the Eagles classic in this video:

EAGLES – HOTEL CALIFORNIA
Uploaded by hushhush112. – Music videos, artist interviews, concerts and more.

]]> http://allthingsd.com/20100423/welcome-to-the-hotel-california-heres-whats-really-happening-in-the-foursquare-pig-pile/feed/ 11 http://allthingsd.com/20100316/china-to-google-please-exit-in-an-orderly-fashion/ http://allthingsd.com/20100316/china-to-google-please-exit-in-an-orderly-fashion/#comments Tue, 16 Mar 2010 16:55:58 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=36515 If Google’s talks with the Chinese government end with an impasse and the company shutters Google.cn and ramps down its operations in the country, it best do so properly and according to law. That’s the latest from Beijing, which continues to threaten and posture amid reports that the search giant is on the brink of closing its Chinese search engine.

“On entering the Chinese market…[Google] clearly stated that it would respect Chinese law,” Ministry of Commerce spokesman Yao Jian said Tuesday. “We hope that whether Google Inc continues operating in China or makes other choices, it will respect Chinese legal regulations….Even if it pulls out, it should handle things according to the rules and appropriately handle remaining issues.”

It’s not clear just what these “remaining issues” are–perhaps some sort of formal notification of withdrawal and the forfeiture of Google’s Internet Content Provider license, which is evidently up for renewal this month. In any event, the rhetoric seems to suggest that Beijing assumes Google (GOOG) will be following through on its “new approach to China” threat relatively soon.

PREVIOUSLY:

• Beijing to Google’s China Partners: Nice Site You Got There. Shame if Something Happened to It.
• China: We Are in Talks With Google. Also, We Are Not in Talks With Google.
• Chinese Scientists Recalibrate Google’s Evil Scale
• Chinese Schools Tied to Attacks on Google? Where’d You Read That, Mad Magazine?
• World War WAN: Google Hack Traced to Schools in China
• Nearly a Month After Debut, Google’s “New” Approach to China Still a Lot Like the Old One
• Google CEO: Ask Not What Google Can Do for China–Ask What China Can Do for Google
• China on “Google Farce”: Our Internet Is Open
• China to Google: No Worries, We Were Planning to Clone Those Android Phones Anyway
• U.S. State Department to Complain to China About Google Hack. Not That China’s Going to Listen.
• Microsoft: “Don’t Be Evil” Is Google’s Motto, Not Ours
• What’s the Chinese Word for Bing? Google Threatens to Leave China.

]]> http://allthingsd.com/20100316/china-to-google-please-exit-in-an-orderly-fashion/feed/ 0 http://allthingsd.com/20100308/china-mobile-hopes-to-sell-wifi-iphone-hopes-being-the-operative-word-here/ http://allthingsd.com/20100308/china-mobile-hopes-to-sell-wifi-iphone-hopes-being-the-operative-word-here/#comments Mon, 08 Mar 2010 17:53:26 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=36304 A quick update on Apple’s relationship with China Unicom, the company’s carrier partner in China.

According to China Unicom Chairman Chang Xiaobing, the two companies are discussing plans to debut a Wi-Fi-enabled version of the iPhone, something they couldn’t do previously because of a government regulation prohibiting the sale of Wi-Fi devices that don’t support China’s Wired Authentication and Privacy Infrastructure wireless standard.

Evidently, Beijing has recently revised that regulation and now permits the sale of Wi-Fi phones in the country as long as they also support WAPI, and this change has reignited talks between the two companies.

“I know that in the market there is hope we will offer an iPhone with Wi-Fi,” Xiaobing told reporters attending the annual session of the National People’s Congress. “We have been holding talks with Apple in this area.”

Whether the talks go anywhere is another question. As Dan Butterfield observes at iPhonAsia, an iPhone that supports two different wireless standards would require Apple (AAPL) to customize the device for the Chinese market, something it has been loath to do in the past.

“It runs against Apple’s DNA to build a special model iPhone solely for one market…even if that market is China,” Butterfield writes.

“But,” adds Butterfield, “…never say never! The current model iPhone for China Unicom is already a special production run (no WiFi chip + many ‘for China’ apps preloaded). If China Unicom commits to a sufficiently large iPhone pre-purchase, then Apple may entertain the idea of a WAPI/WiFi iPhone.”

]]> http://allthingsd.com/20100308/china-mobile-hopes-to-sell-wifi-iphone-hopes-being-the-operative-word-here/feed/ 0 http://allthingsd.com/20100308/china-we-are-in-talks-with-google-but-we-are-also-not-in-talks-with-google/ http://allthingsd.com/20100308/china-we-are-in-talks-with-google-but-we-are-also-not-in-talks-with-google/#comments Mon, 08 Mar 2010 12:02:54 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=36275 Like so many of its services, Google’s so-called “New Approach to China” appears to be in perpetual beta. Though Google has said repeatedly that it is in discussions with Chinese officials about its plans to end censorship of search results in the country, the Chinese government claims Google hasn’t yet initiated talks.

Over the weekend, Vice Minister Miao Wei of China’s Ministry of Industry and Information Technology told Xinhua, the state-run news agency, that “[Google] never informed the ministry that it was planning to withdraw from China, [nor has it] filed reports over alleged Internet regulation and cyberattacks to the ministry or requests for negotiations.”

Odd to hear, considering Google’s rather definitive Jan. 12 announcement that it will stop censoring its Chinese search site and may withdraw from the country altogether. More so given the comments of another MIIT minister just a day earlier. On Friday, Li Yizhong told reporters attending the National People’s Congress that the ministry is in talks with Google about its plans to operate an unfiltered search engine in China.

Sources close to the situation confirm that this is the case: Google (GOOG) has been in private talks with Beijing, though not formally. Of course, though nearly two months have passed since Google first said it would stop censoring search results in China, queries to Google.cn continue to return censored results.

As I noted here a month ago, “we are no longer willing to continue censoring our results” is about as definitive a statement as they come. Is Google going to follow through or not? Why all the mystery and dawdling?

Could it be that Google is now backing off its initial threat? Because, as Yahoo CEO Carol Bartz suggested last week, that threat seems increasingly empty the longer this thing drags out. “It looked to me like it was more of a statement than an action,” she told CNBC. “If they wanted to pull out, they should have pulled out.”

Reached for comment, Google offered none beyond this now typical refrain: “Thanks for reaching out, but as you might suspect, we will not be commenting on any discussions with the Chinese Government.”

PREVIOUSLY:

• Chinese Scientists Recalibrate Google’s Evil Scale
• Chinese Schools Tied to Attacks on Google? Where’d You Read That, Mad Magazine?
• World War WAN: Google Hack Traced to Schools in China
• Nearly a Month After Debut, Google’s “New” Approach to China Still a Lot Like the Old One
• Google CEO: Ask Not What Google Can Do for China–Ask What China Can Do for Google
• China on “Google Farce”: Our Internet Is Open
• China to Google: No Worries, We Were Planning to Clone Those Android Phones Anyway
• U.S. State Department to Complain to China About Google Hack. Not That China’s Going to Listen.
• Microsoft: “Don’t Be Evil” Is Google’s Motto, Not Ours
• What’s the Chinese Word for Bing? Google Threatens to Leave China.

]]> http://allthingsd.com/20100308/china-we-are-in-talks-with-google-but-we-are-also-not-in-talks-with-google/feed/ 0