Here’s Why Yahoo’s Marissa Mayer Wants to Break Up with Microsoft

Yahoo! Inc. (NASDAQ:YHOO) continues to struggle to unravel its 10-year search advertising pact with Microsoft Corp. (NASDAQ:MSFT), Bloomberg reported Wednesday. Chief Executive Officer Marissa Mayer has been unsuccessfully attempting to end this partnership ever since joining Yahoo and becoming CEO in July. Mayer seems to be interested in instead teaming up with her former employer, Google Inc. (NASDAQ:GOOG), but has met with resistance from Microsoft.

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It is not difficult to understand Yahoo’s frustrations. The agreement between the two companies of Microsoft providing the technology for Yahoo only has incited disappointment. The Wall Street Journal explains that “Yahoo’s revenue per search has been worse under the Microsoft deal than when it operated its own Web-search technology and advertising system.” This failure to meet estimates has prompted Mayer to seek alternatives, and Google’s readiness to enter negotiations of a potential partnership is becoming more appealing.

Microsoft and Yahoo’s pact ends in 2020, and was originally inspired in 2010 as an attempt to take on Google. They agreed to combine their search-advertising systems, and Yahoo consented to use Microsoft’s Bing search engine.

Though, according to Bloomberg, “people familiar with the matter” are those responsible for the reports about Microsoft and Yahoo’s discord, Mayer continues to publicly praise Microsoft. During a technology conference yesterday, Bloomberg reports her saying, “We’re happy with the relationship…We’re working really well together.”

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Nevertheless, if it is true that Yahoo wants out of the deal, it’s unlikely it will be able to terminate it until 2015 — the midway point of the 10-year agreement. Although two other conditions could result in the termination of the agreement — Microsoft’s selling of Bing or Yahoo’s revenue per search falling below a certain level — both possibilities seem unlikely. It is then up to Marissa Mayer to unravel her way out of this one.

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