Microsoft Makes Unsolicited Bid for Yahoo Inc.

February 4, 2008

(Long Island, N.Y.) Microsoft Inc., has placed an aggressive bid of $44.6 Billion dollars, which the company states it may actually borrow from banks to help the banking industry, to purchase the search engine company Yahoo Inc., in a move aimed at gaining ground against the current leader of web innovations Google. Both Microsoft and Yahoo have struggled to find products and services needed to surpass Google but together, both companies could easily integrate enough of their own unique products and combine them to create one dynamic end result that could spell the downfall of Google.

The bid mathematically means $31 per share of stocks which represents a 62% premium on what Yahoo closed at last week. Microsoft also re-iterated that current stock holders of Yahoo Inc. could choose between cash and stock options if the current bid is accepted by Yahoo. “We have great respect for Yahoo, and together, we can offer an increasingly exciting set of solutions for consumers, publishers, and advertisers while becoming better positioned to compete in the online-services market,” Microsoft CEO Steve Ballmer said in a statement.

Microsoft revealed their thought behind the bid for Yahoo in saying, “Today, the market is increasingly dominated by one player, who is consolidating its dominance through acquisition, together Microsoft and Yahoo can offer a credible alternative.” A clear statement that indicates both companies concern with regards to Google as their rival and the leader in today’s market.

In a response, Yahoo Inc. said, “We will evaluate this proposal carefully and promptly, in the context of Yahoo’s strategic plans, and pursue the best course of action to maximize long-term value for shareholders.”

If Yahoo approves the deal and gets the proper regulatory approvals, the deal could be finished by the second half of the year. Currently Yahoo ranks second to Google in page visits on the internet while MSN search from Microsoft stands a distant third. If the deal pushes through changes like incorporating the two company’s online portal, direct integration of web content and the use of Yahoo to further strengthen Microsoft’s powerful desktop applications like Word and Excel should be expected.

Imran Khan of J.P. Morgan Securities thinks that regulators will approve the deal. “Yahoo is better off inside a larger company with strong balance sheets and technology, a combination of Yahoo’s relationships, and Microsoft’s applications and devices, which could create a very well positioned potential competitor,” Khan wrote.

Over the weekend Google Inc., has been reported to have raised serious concerns about the near 45-billion dollar takeover bid for Yahoo, terming the deal as a threat to openness of the internet as well as anti-trust issues. Google CEO Eric Schmidt is in discussions with Yahoo CEO Jerry Yang to offer the company help in an effort to thwart Microsoft’s bid.

The online advertising market is expected to increase from over $40 billion in 2007 to nearly $80 billion by 2010.

Posted by News LI Editor · Edited by Brianna - Filed Under Business