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Yahoo! Signs 3-Year Deal with Oracle to Boost Search - Analyst Blog

Zacks Equity Research

Tech giant Yahoo! Inc.’s YHOO Chief Executive Marissa Mayer painted a bright picture of the company's future at Yahoo's annual shareholders meeting. Mayer affirmed that the best days for the company are yet to come. Investors were apprehensive going into the meeting as the stock has fallen nearly 20% in the past 6 months.  

Yahoo! also announced that it has signed a deal to keep Katie Couric on as its star news anchor, and that the renegotiation of the contract was reportedly worth $10 million.

But the key takeaway from the meeting was the announcement of its three-year partnership with one of the largest enterprise-grade database, middleware and application software providers-Oracle ORCL.

Alliance

Under the collaboration, starting this month, Yahoo will be the default search engine for users who download or update Oracle’s Java software on their PCs. Financial terms were kept under wraps.

While installing or updating Java, one of the first screens that will pop up on the screen is a checkbox asking users to “set Yahoo as your homepage and default search engine on Chrome and Internet Explorer, plus get Yahoo as your new tab page on Chrome.” They can uncheck if they do not want to do so.

As per Yahoo!, the Oracle deal replaces its earlier deal with Ask.com, the search engine owned by IAC/Interactive IACI. The recent deal is a little different. It will just ask users to reconfigure their web browser settings, instead of bundling any software with Java whereas on Ask.com, Oracle bundled the software with Java.

Why is the Deal Important?

Search is an area where Yahoo is starting to show decent performance.  Its deal with Mozilla Corp. to replace Google GOOGL and become Firefox’s default search engine for the next five years and the revision of the search deal with Microsoft are positives. Even though key metrics like volume and prices appear to be improving, they haven’t really helped it move in terms of market share.

As per the most current study by comScore,  Yahoo holds just 12.7% of the search market, which is below Google’s 64.2% and Microsoft‘s 20.2% This goes to show that Google still remains very strongly positioned versus Yahoo and Microsoft remains a strong number two.

The deal could work as a silver lining for Yahoo. Java is installed on 89% of personal computers in the U.S. and billions of devices worldwide according to Oracle’s website.

Therefore the deal will likely fetch a meaningful number of new users to Yahoo search. This will ramp up its search business, search engine market share and advertising business, thereby boosting its revenues.

Yahoo has a Zacks Rank #3 (Hold).

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YAHOO! INC (YHOO): Free Stock Analysis Report
 
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