Microsoft legal chief sees risk in Yahoo deal

The deal,struck in late July after months of talks,faces a tough regulatory review,and the possibility that it won't be enough to effectively challenge Google Inc.

Microsoft Corp has confidently described its planned search advertising deal with Yahoo Inc as a “win-win”,but the software company’s legal chief is prepared to concede that the outcome is not certain.

The deal,struck in late July after months of talks,faces a tough regulatory review,and the possibility that it won’t be enough to effectively challenge Google Inc.

“For both companies,it would be right to say this is not risk-free,” said Microsoft general counsel Brad Smith,in an interview last week. “I don’t know of any investment that is.”

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The deal,struck on July 30,proposes that Microsoft’s Bing becomes the search engine for both,while Yahoo focuses on attracting big advertisers.

Microsoft shareholders generally welcomed the deal,but Yahoo’s shares plunged as investors bemoaned the lack of an upfront payment from Microsoft or revenue guarantees in hard dollars.

Analysts pointed out that Microsoft still had an incentive to take market share from Yahoo,and that Yahoo’s salesforce could end up selling ads they would not be paid for if clicked on in a Microsoft site.

Smith acknowledged that such a situation was possible,but pushed attention to the potential upside.

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“I do think there is a compelling business return that each company has a strong opportunity to generate for its shareholders,” he said.