Microsoft offers to buy Yahoo!

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Microsoft has offered to buy Yahoo for US $44.6 billion.   

The following announcement is from Microsoft:-

REDMOND, Wash. — Feb. 1, 2008 — Microsoft Corp. (NASDAQ:MSFT) today announced that it has made a proposal to the Yahoo! Inc. (NASDAQ:YHOO) Board of Directors to acquire all the outstanding shares of Yahoo! common stock for per share consideration of $31 representing a total equity value of approximately $44.6 billion. Microsoft’s proposal would allow the Yahoo! shareholders to elect to receive cash or a fixed number of shares of Microsoft common stock, with the total consideration payable to Yahoo! shareholders consisting of one-half cash and one-half Microsoft common stock. The offer represents a 62 percent premium above the closing price of Yahoo! common stock on Jan. 31, 2008.

“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,” said Steve Ballmer, chief executive officer of Microsoft. “We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”

Our lives, our businesses, and even our society have been progressively transformed by the Web, and Yahoo! has played a pioneering role by building compelling, high-scale services and infrastructure,” said Ray Ozzie, chief software architect at Microsoft. “The combination of these two great teams would enable us to jointly deliver a broad range of new experiences to our customers that neither of us would have achieved on our own.”

The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners.

“The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs,” said Kevin Johnson, president of the Platforms & Services Division of Microsoft. “The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers.”

The combination will create a more efficient company with synergies in four areas: scale economics driven by audience critical mass and increased value for advertisers; combined engineering talent to accelerate innovation; operational efficiencies through elimination of redundant cost; and the ability to innovate in emerging user experiences such as video and mobile. Microsoft believes these four areas will generate at least $1 billion in annual synergy for the combined entity.

Microsoft has developed a plan and process that will include the employees of both companies to focus on the integration of the combined business. Microsoft intends to offer significant retention packages to Yahoo! engineers, key leaders and employees across all disciplines.

Microsoft believes this proposed combination would receive all necessary regulatory approvals and expects that the proposed transaction would be completed in the second half of calendar year 2008.

Microsoft is also committed to working closely with Yahoo! management and its Board of Directors as they, along with Yahoo! shareholders, evaluate this compelling proposal. “

What will Google make of this?    (See a related article from October 2007 – https://kayenightingale.wordpress.com/2007/10/26/microsoft-to-pay-240-million-for-a-stake-in-facebook/)

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3 Responses to Microsoft offers to buy Yahoo!

  1. Yahoo Offer Is Strategy Shift for Microsoft
    by Steve Lohr of The New York Times

    There is an interesting article today in The New York Times online …

    “Microsoft, too, is moving to offer more software features as Web-based services, though it sees a future that revolves around both personal computer software and online services.

    Microsoft has been forced to adopt a new strategy for a different kind of threat than it has confronted, and usually dispatched, in the past.

    “This shows just how worried Microsoft is by Google,” said David B. Yoffie, a professor at the Harvard Business School. “Microsoft has faced competitive threats before, but none with the size, strength, profitability and momentum of Google.”

    See the full article at:-

    http://www.nytimes.com/2008/02/02/technology/02soft.html?ex=1359694800&en=c407bbf2504247c0&ei=5088&partner=rssnyt&emc=rss

  2. Eyes on Google, Microsoft Bids $44 Billion for Yahoo
    by By MIGUEL HELFT and ANDREW ROSS SORKIN of The New York Times

    There is a further interesting article today in The New York Times online…

    “Microsoft, which paid $6 billion last year for the online advertising specialist aQuantive, already sells ads on popular sites like Facebook and Digg, as Yahoo does on eBay, Comcast and the sites of hundreds of newspapers. ”

    “Google, for its part, beat out Microsoft for deals with MySpace, AOL and others. The challenge of integrating the two companies could well become one of the most complex undertakings in Microsoft’s history. “In the world of mergers and acquisitions, this is as tough as it gets,” Mr. Yoffie added.”

    See the full article at:-

    http://www.nytimes.com/2008/02/02/technology/02yahoo.html?_r=1&oref=slogin

  3. Would Merger Demote Yahoo to a Microsoft Front End?
    by Elizabeth Montalbano, IDG News Service

    There is a further interesting article today in PC World magazine (online)…

    “The Yahoo platform is really what they’re buying,” he said. “With Yahoo they’re tapping into the base culture of the Internet online community that’s matured over the last 10 years. It’s going to make it easier for people to take a look at and try their services, whereas before it had to be a more conscious effort.”

    “Aside from the usual raft of consumer applications like search, e-mail, maps and the like, Microsoft already has brought some of its many business desktop applications — such as Office and CRM — online in hosted, though often scaled-down, versions. ”

    “Access to Yahoo’s estimated 500 million visitors per month will give it a new channel to deliver what the company now calls its “software plus services” strategy, as well as buy the company time to bring more competitive versions of applications that were originally coded for the desktop to the Web.”

    See full article aticle at:-

    http://www.pcworld.com/article/id,142116-pg,1/article.html

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