SAN FRANCISCO — A day after Yahoo said it had ended talks with Microsoft and signed an advertising deal with Google, some of its shareholders were still holding on to hopes that some kind of marriage between Yahoo and Microsoft could be consummated. “The door is cracked open,” said Ryan Jacob, portfolio manager for the Jacob Internet Fund, which holds about 100,000 shares of Yahoo. “It is not completely shut.”
As evidence that the software giant itself had not given up and might be campaigning to get the support of Yahoo shareholders, Mr. Jacob pointed to Microsoft’s decision Friday to disclose the terms of the last offer it made to Yahoo. “If they weren’t interested in doing a deal with Yahoo, why would they bother?” Mr. Jacob asked.
Microsoft said it had offered to buy Yahoo’s search business for $1 billion and to buy $8 billion in Yahoo shares at $35 each. The company also said it had offered to enter into a long-term agreement that would compensate Yahoo for revenue coming from searches on that site. Importantly, that agreement included guarantees that for three years, Microsoft would pay Yahoo more than what it currently earns for those searches.
By Microsoft’s calculations, the deal would deliver an additional $1 billion in operating income annually to Yahoo.
The details of Microsoft’s offer were made public in a letter from Kevin Johnson, the president of the company’s platform and services division that includes Microsoft’s online unit.
On Friday, Microsoft reiterated statements made Thursday that the offer for Yahoo’s search business alone was still on the table, but the offer to buy all of Yahoo, which Microsoft withdrew on May 3, was not.
Yahoo’s partnership with Google is a much more limited commercial agreement under which Google will deliver ads alongside some Yahoo searches and will allow Yahoo to retain control of its search business. It is therefore difficult to compare it directly with Microsoft’s offer. However, it is expected to bring only an additional $250 million to $450 million a year in operating cash flow to Yahoo.
A Yahoo spokesman said Friday that Microsoft’s contention that its offer would deliver $1 billion in extra operating income to Yahoo was based on “unrealistic expectations.”
The company said in a statement Thursday that a search deal with Microsoft “would not be consistent with the company’s view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo stockholders.”
A large Yahoo shareholder who agreed to speak only on condition that he remained anonymous said the deal that Microsoft outlined Friday was far preferable to Yahoo’s deal with Google.
On Wall Street Friday, Yahoo’s decision to partner with Google and not Microsoft continued to be met with disapproval. Yahoo shares tumbled more than 5 percent before recovering late in the day to close at $23.47, down 5 cents. They had fallen 10 percent on Thursday.
The large Yahoo shareholder said that while the Yahoo-Google deal could be rescinded, he held only faint hope that Yahoo might reverse course. That might happen if Carl C. Icahn, the activist investor, succeeded in taking control of Yahoo, or if the Yahoo deal with Google was blocked by antitrust regulators.
Mr. Icahn could not be reached Friday. He has not made any public statements since Yahoo announced its partnership with Google.
Mr. Icahn’s takeover of the board could trigger a costly employee severance plan implemented by Yahoo and therefore could make shareholders reluctant to vote for Mr. Icahn’s slate, the large Yahoo investor said.
Still, others like Mr. Jacob and an investor with a fund that specializes in merger arbitrage, who asked not to be named citing his company’s policy not to discuss investments publicly, said they thought Microsoft and Yahoo might be brought back together before Yahoo’s shareholder meeting, which was scheduled for Aug. 1.
“There are some things that could happen between now and the end of July that could be a positive,” Mr. Jacob said. “I am not willing to write the postmortem.”
In a note to investors, UBS analyst Benjamin Schachter went further: “We continue to believe that, at some point, Microsoft will acquire all of Yahoo,” he wrote.
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