Microsoft Adds to Yahoo! Bid: Report

NEW YORK (TheStreet) - Microsoft(MSFT) has signed a nondisclosure agreement with Yahoo!(YHOO), according to New York Times reports, citing anonymous sources.

The moves signals that Microsoft may make a takeover bid for Yahoo!, or its valuable Asian pieces.

Earlier in November, private equity firms Silver Lake and TPG Capital signed NDA's with Yahoo! as the Sunnyvale, Ca. -based company undergoes a strategic review to maximize shareholder value. Meanwhile Yahoo!'s Asian partners Alibaba and Softbank, along with and the world's largest private equity fund Blackstone(BX) have resisted signing agreements, according to reports by AllthindsD. NDA's, or exclusivity agreements, allow potential bidders to have a deep look into the struggling Web giant's books, but preclude them from partnering on a takeover offer.

Speculation about Yahoo!'s fate began in earnest when the company ousted Carol Bartz as CEO in early September and hired investment bankers to undertake a strategic review of its options.

Scenarios that have been discussed in the press have included a full company sale, a divestiture of minority owned Asian assets like Alibaba and Yahoo Japan, or a push for growth in online ad sales through acquisitions.

Wednesday's report of Microsoft's agreement to enter exclusivity with Yahoo! signals that bidding on the company may take a dual track. While some like Microsoft or Silver Lake will look at single bids, more hostile partner bids may emerge from Blackstone, Alibaba and Softbank. Still unclear is whether any bid will actually emerge and if it will potentially involve one party or multiple hostile buyers, though rumors have circulated for months.

Yahoo! owns a near 40% stake in Alibaba and a near 35% stake in Yahoo Japan, Softbank also has a major shareholding in Yahoo Japan. Alibaba, like Microsoft, is already closely entwined with Yahoo!, and the Chinese Web giant's CEO, Jack Ma, has said that he's "very interested" in buying Yahoo!, a deal which would significantly boost the firm's U.S. presence.

Strategic buyers may not just include Microsoft, rumors earlier this fall noted that Google(GOOG). looking at a Yahoo! bid.

Microsoft, which attempted to buy the Web giant for $44 billion in 2008, may look to purchase Yahoo! to save money on a search partnership with Yahoo! and market its recently completed Skype business. Nevertheless, there may be antitrust complications for a Microsoft or Google bid.

Currently, Google dominates the overall search ad revenue space with an over 80% share according to Web data firm eMarketer, with Microsoft's Bing partnership with Yahoo a distant second at 16%, and no clear third or fourth competitors. In online ad display revenue, Yahoo! holds a 13.1% display ad market share, while Microsoft draws 4.8% of the market. According to eMarketer data for 2011, a Yahoo and Microsoft combination would gain 17.2% of overall online ad revenue from just 6.1% and 11% respectively as independents. It would be a still distant second to Google's 40.8% of the market share.