Commercial Real Estate Blog

Yahoo has entered into a non-exclusive agreement with Google (NASDAQ:GOOG) to allow Google to run ads on Yahoo’s web properties. The deal is estimated to ad approximately $800M a year in cash flow to Yahoo. As of June 8th, Microsoft and Yahoo have concluded their negotiations as well.

Microsoft (NASDAQ:MSFT) has expressed interest in continuing negotiations for a portion of Yahoo, but supposedly is no longer interested in an outright takeover of all of Yahoo. Yahoo still is not out of the woods though, their will undoubtedly be some anti-trust scrutiny of the deal, as well as continued pressure from Carl Icahn, Boone Pickens, and other large shareholders as they likely still seek to oust Jerry Yang and supplant the board with their own, presumabely so they can push through a deal with Microsoft.

Yahoo’s shares (NASDAQ:YHOO) ended down the day 10% to $23.63, roughly 30-40% less than where a deal with Microsoft could have been struck a few months ago.

As for the real estate plans of both companies, Google recently signed a deal with NASA for a ground lease to build a campus, and Yahoo owns some 50 acres in Santa Clara that is available to it to construct a campus if need be. As of now, Yahoo is mainly spread out between its Sunnyvale and Santa Clara campuses, with much of the Santa Clara campuses and buildings owned by Sobrato.

The Yahoo-Microsoft fiasco continues. Attorneys for investors won the right yesterday in court to release meeting minutes and other details behind the so far non-acquisition of Yahoo! (NASDAQ: YHOO) by Microsoft (NASDAQ: MSFT). Not much of a commercial real estate angle here except to say that Yahoo owns a bunch of land in Santa Clara that was originally slated for development into a campus and that those plans are probably on the back burner while they defend themselves.

Apparently, from documents released yesterday, Microsoft offered $40 per share for Yahoo! back in January and management estimated that a Microsoft takeover could translate into a 15% or 30%  reduction in Yahoo workforce. Yahoo is now faced with a barrage of complaints from disgruntled investors, with big boys Carl Icahn, Daniel Loeb, and Boon Pickens in for a fight to oust the current board and replace them with a more Microsoft-Merger friendly group.

It will be intersting to see what happens.

Microsoft has launched a $45B unsolicited bid for Yahoo! Combined, the two would be a more formidable competitor to Google, both in terms of search market share, as well as ad inventory. What will be interesting to see is that if the acquisition is indeed successful, to what extend Microsoft will embrace open-source technologies and how it integrates the two companies.

From a real estate perspective, in Silicon Valley, Microsoft may elect to keep things seperate but also has the option of utilizing Yahoo!’s 50-acre campus site in Santa Clara it purchased two years ago to combine operations. Yahoo! is currently leasing most of its Santa Clara facilities on leases which expire roughly 2-3 years from now. Given the current job cuts and overall woes with the company however, it is unlikely that they would break ground on a new campus anytime soon. Microsoft recently renegotiated for a longer term on its 450,000 SF Mountain View campus.

Also today, Kara Swisher revealed financials from Facebook based on a company-wide conference call held by Mark Zuckerberg. Some numbers are below:

• 2007 Revenues: $150 million
• 2008 Revenues: $300 to $350 million (projected)
• 2007 Headcount: 450
• 2008 Headcount: 1,000 (projected)
• 2008 Capital Expenditures: $200 million (i.e., servers)
• 2008 EBITDA: $50 million
• 2008 Cash Flow (EBITDA - CapEx): negative 150 million.

Based on the above, it would indicate that Facebook will likely be out in the market very soon looking for at least 100,000 SF of space. They are also hiring an executive chef which implies that they are emulating Google in many regards and it will likely push their requirement north of 100,000 into the 200,000-250,000 SF territory to accomodate growth simply beyond the 2008 mark.