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Yahoo, Sony Announce Multiyear Partnership

Internet: Analysts say the relationship could mark a shift in strategy for the struggling Web company.

August 01, 2001|CHARLES PILLER | TIMES STAFF WRITER

SAN FRANCISCO — Yahoo Inc. and Sony Corp. of America announced a series of agreements Tuesday that closely tie Sony's Web sales and marketing efforts to the struggling Web portal.

The companies declined to disclose financial terms, and said no equity investments by either company were involved or under discussion.

Analysts consider the announcement notable for its symbolism. Terry Semel, Yahoo's new chief executive, was recruited partly to forge stronger relationships with the entertainment industry. Semel was formerly co-chief executive of Warner Bros. movie studio.

"It doesn't sound like a multimillion-dollar prospect for Yahoo, [but] this is the first deal that Terry Semel has signed," said Safa Rashtchy, an analyst with U.S. Bancorp Piper Jaffray. "It could get investors excited that more deals may be coming."

The agreements call for a co-branded Sony-Yahoo Web site, preferential placement for Sony products on Yahoo's online store, and advertising and marketing for Sony across Yahoo's worldwide network. Yahoo also will advise Sony on its other online efforts.

The companies said the deal will be in force for several years.

"Of all the Internet companies, Yahoo's global presence is the most mature and widespread," said Howard Stringer, chief executive of Sony Corp. of America, in a conference call with analysts and reporters. "If this isn't an absolute marriage, it's at least holding hands."

Sony also is dating Yahoo competitor AOL Time Warner Inc. Sony recently inked a deal to deliver the AOL experience via the Internet features of Sony's PlayStation 2 game console.

Yahoo President Jeff Mallett predicted that Tuesday's announcement will be the start of a broader relationship between Sony and Yahoo. "There is still more to come," he said in an interview.

Analysts said a deep relationship with Sony could mark a shift in strategy for the troubled Web company, which has seen advertising revenue and its stock price plummet in the last year.

"It's a little bit of a breakdown in Yahoo's historic insularity," said Lanny Baker, an analyst with Salomon Smith Barney. Yahoo has always said, "We're agnostic about distribution, we're agnostic about content," he added. Yet the Sony announcement is much broader than previously announced media relationships.

Yahoo may need a series of such deals to emerge from its current malaise.

"If this and all the nothing that's come before it is all we're going to get, [Semel's] not going to make much money on the stock he bought," said Baker, with reference to Semel's purchase of 1 million Yahoo shares when he was hired in May.

Yahoo shares fell 18 cents to close at $17.62 in Nasdaq trading Tuesday. Sony rose $3.12 to close at $49.52 in New York Stock Exchange trading.

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