Just How Good Does The MSFT Deal Look To Yahoo’s Numbers?

Jefferies analyst Youssef Squali ran some of the numbers on Yahoo’s (YHOO) potential search/display ad deal with Microsoft (MSFT) in a report today. His notes from SAI. Keep in mind this is based on a partnership, not an all-out asset swap.

Outsourcing search infrastructure to Microsoft could save Yahoo $1 billion to $1.3 billion per year.

A 50/50 revenue share to sell display ads on Microsoft’s sites could bring in $600 million to $800 million in incremental annual revenue for Yahoo. (Assuming the display ad business doesn’t fall off a cliff.)

So, combined savings/revenue could be $1.6 billion to $2.1 billion per year. (Not bad for a company with $5 billion in annual sales.)