SUNNYVALE, Calif. — Yahoo has hired Internet search leader Google to sell some online ads in hopes of boosting its profit.
The company announced the plans late Thursday after its stock plunged 10 percent on news that its efforts to revive takeover talks with Microsoft had hit a dead end.
Yahoo is now counting on Google’s superior moneymaking system to appease its angry shareholders as it tries to fend off a shareholder mutiny being led by activist investor Carl Icahn.
By using Google’s superior advertising technology, Yahoo believes it can boost its annual cash flow by $250 million to $450 million in the first year of the deal.
The partnership could last up to 10 years if it can win antitrust approval.
While a stock sell-off is never welcome news for any company, Wall Street’s disenchantment comes at a particularly bad time for Yahoo and its board of directors.
Icahn has vowed to replace the company’s board because of the way the directors handled the Microsoft negotiations.
But Icahn has been hoping to engineer a sale to Microsoft, so some shareholders may be reluctant to support his attempted coup unless he can demonstrate his slate of directors has a better turnaround plan than the current board.
Icahn did not return phone calls seeking comment Thursday.
The fate of Yahoo’s board is scheduled to be determined at the company’s Aug. 1 annual meeting.
Yahoo tried to persuade Microsoft to revive its last takeover offer of $47.5 billion, or $33 per share, but the software maker wasn’t willing to bid that much again, according to statements from the two companies.
Microsoft chief executive Steve Ballmer had withdrawn an oral offer of $33 per share after Yahoo CEO Jerry Yang asked for $37 per share in a May 3 meeting at a Seattle airport.
Shortly after that breakdown, Microsoft tried to persuade Yahoo to sell its online search operations instead.
But Yahoo concluded that its search engine — the Internet’s second-most popular behind Google — was too important to sell piecemeal.
Yahoo said Microsoft “unequivocally” rejected the notion of buying the entire company in a meeting Sunday.
Without explaining its logic, Microsoft said it believed a deal involving Yahoo’s search engine would have been more valuable to Yahoo than if it had bought the entire company at $33 per share.
Yahoo now has to find a way to minimize the damage to its stock, which dropped $2.63, or 10.1 percent, to finish Thursday at $23.52.
