Yahoo Deal With Microsoft May Hit Overture

In a major deal, search portal provider Yahoo and software giant Microsoft said that the two companies are in a deal where Yahoo will replace its own search engine technology with that of Microsoft--with potentially huge repercussions to Yahoo's Southern California search engine marketing operations. Yahoo and Microsoft said that Yahoo will use the technology behind Microsoft's Bing search engine to power all of the web search aspects of its web site, with Yahoo taking over premium search advertising sales for Microsoft. The two specifically said, in an oblique reference to Google, that the move would provide an alternative to advertisers, so that they no longer to have "rely on one company that dominates more than 70 percent of all search." The move may have a huge impact of Yahoo's staff and operations in Pasadena and elsewhere in Southern California: Microsoft and Yahoo said that instead of using Yahoo's own paid search services, they will instead fulfill self-serve advertising through Microsoft's AdCenter, which has been a direct competitor to what was Overture Services. No specific mention of the Pasadena operations were mentioned, but Yahoo said it expects to get a benefit in its annual operating income of $500M, and save on approximately $200M in capital expenditures from the deal; it saysit expects to gain $275M in annual operating cash flow by using Microsoft's search technology.