Microsoft (NSDQ: MSFT) may not be making any upfront payment to Yahoo (NSDQ: YHOO), but it will be paying heavily on the back-end to make the transition to powering Yahoo’s search engine. During Wednesday’s call, Microsoft CEO Steve Ballmer said there would be “several hundreds — a couple of hundreds of millions probably” of transition costs over the next two years. A slide made public — and later taken down — at the company’s analyst day, however, shows that those costs could be substantially greater over an unspecified period — as much as $675 million, including $90 million in pre- and post- close retention costs and $50 million for advertiser migration.
The slide also puts some round numbers for the first time on how much Microsoft expects to make (and at first lose) via the deal. Microsoft says it will lose money in the first two years of the agreement ($300 million total) and then “start making decent return ($400m steady state).” See screenshot here, via Seattle Times, which first noted the slide.
Executives have also emphasized the non-monetary challenges the transition will bring. Qi Lu, the president of the online services division, said that there’s a “lot of tight collaborations needed” so that advertisers keep on spending and so that for Yahoo users the transition will be “seamless.”
(Oh, and Ballmer flat-out denied that the company was still interested in buying Yahoo out-right — in case anybody was still wondering: “Are we interested in a full acquisition? The answer is no.”)