IAC Chairman Barry Diller touched off a wave of acquisition speculation over Ask.com in the parent company's third-quarter earnings call, and now Wall Street analysts and search engine marketing executives are supporting such a sale to none other than Microsoft.
“We’ve been asked a lot whether we’re open to consolidating transactions in the area of search. The answer is yes. And it is unlikely that we would be the consolidator," Diller said on the Oct. 27 call with analysts.
Redmond, Washington-based software maker Microsoft could quickly scale up its U.S. search market position by scooping up Oakland, California-based Ask.com's 3.9 percent, lifting its total share to about 32.1 percent when combined with its deal for Yahoo of Sunnyvale, California, according to Piper Jaffray analyst Gene Munster. That would give it a better fighting chance against Google, which commands 64.9 percent of the search market.
"It's no surprise that the most logical fit as an acquirer of Ask in the current search marketplace is Microsoft," Munster wrote Friday in a note to clients. "One other option as an acquirer of Ask would seem to be to a private equity group."
Piper Jaffray's analyst noted, however, that a private equity sale would unlikely secure the same price for Ask.com because it would be viewed as a "business sale" rather than a "market share grab."
From a search-advertising perspective, Ask.com in combination with Microsoft's Yahoo deal makes a better "next-best alternative" in competing with search leader Google, said Kevin Lee, CEO of search engine marketing company Didit of Rockville Centre, New York.
"Microsoft would indeed be able to sell the paid-search inventory on Ask with the same system, adCenter, that powers Bing (Microsoft's search) now," Lee said
Also, a Microsoft-Ask.com deal could boost the share price of parent IAC. Piper Jaffray's Munster estimated an acquisition of Ask.com could lift AIC shares between 10 percent and 25 percent, depending on the offer price. The analyst said there would be little competition for the search property and put a price tag ranging from $1.1 billion to $1.67 billion. IAC bought Ask.com, formerly known as AskJeeves, in March 2005 for $1.85 billion.
"I do know that Microsoft is constantly looking at a combination of syndication opportunities and acquisitions. It wouldn't be surprising if they were looking at Ask.com or anybody with a reasonable number of queries," Lee said.
Brigantine Advisors analyst Colin Gillis said that IAC's stock is weighed down by Liberty Media, which owns about 18.4 million shares and is trying to reduce its position.
Gillis said a Microsoft deal for IAC's Ask.com "makes sense" to grab that share of the search market.
IAC responded to requests for comment on the potential for an Ask.com sale.
"While IAC regularly has conversations about a variety of potential transactions across its brands, there's nothing specific happening or planned as it relates to a sale of Ask.com," an IAC representative said by email.
Microsoft representatives declined to comment.