SAN FRANCISCO Yahoo! bolsters itself by acquiring service

Companies continue to jockey over who controls Internet searching.
SAN FRANCISCO (AP) -- Yahoo! Inc. snapped up Overture Services Inc., the pioneer of pay-for-placement online search results, in a $1.6 billion deal that fortifies the Internet powerhouse for a looming showdown with Google and Microsoft.
The cash-and-stock acquisition valued Overture at $24.82 per share -- a 15 percent premium over the stock's closing price last week. The price consists of $312 million in cash and 0.6108 Yahoo shares for each of Overture's 65.7 million outstanding shares.
The deal's value will fluctuate with Yahoo's stock until its expected closing date in the fourth quarter.
Flurry of deals
The deal announced Monday continues a recent flurry of deal-making in the lucrative business of online searching, a crucial axis on which much of the Internet's utility depends.
By buying Pasadena, Calif.-based Overture, Yahoo gains control of one of its most important business partners and strikes a blow against Google and Microsoft.
A fierce rival of Google, which offers ad-based results distinct from its popularity-based search rankings, Overture now threatens to become more formidable by tapping into Yahoo's greater resources, which included $1.1 billion in cash as of June 30.
Privately held Google, which provides some search results to Yahoo, declined to comment on Monday's deal. Microsoft, whose MSN service, like Yahoo, has been collecting steady profits from Overture, was circumspect.
Examining effect
Lisa Gurry, MSN's group product manager, said the software giant will make its next move after examining how Yahoo's deal might affect its relationship with Overture.
Although Yahoo executives said they hope to maintain Overture's existing alliances with partners such as MSN, it seems improbable that the rivals will want to subsidize each other, said Danny Sullivan, editor of the industry newsletter Search Engine Watch.
"This hurts MSN because Overture had been one of its best buddies," Sullivan said.
MSN has been pouring more resources into online searching in an effort to become less reliant on services provided by outsiders.
Overture has played a pivotal role in Yahoo's recent financial revival, accounting for roughly 20 percent of Yahoo's revenue of $604 million during the first half of this year.
Conceived by dot-com entrepreneur Bill Gross in 1997, Overture developed a search engine that sorts its results based on how much advertisers are willing to pay to be ranked under specific words.
Overture's commercial database feeds search engines at popular Web sites such as Yahoo and MSN, which display the advertising links along with results generated by objective, algorithmic formulas.