Microsoft makes $45bn bid for Yahoo!
- Added:
- Feb 01, 2008
Microsoft has made an offer to buy rival Yahoo! for $44.6bn (£26.7bn) in a move to that could create a real threat to Google’s dominance.
Microsoft made an unsolicited approach to Yahoo’s Board on Thursday night , outlined in a letter from CEO Steve Ballmer.
Yahoo acknowledged the proposal and said it would be evaluated "carefully and promptly."
The companies previously held talks about partnering or merging in late 2006, but Yahoo! told Microsoft in February 2007 it wasn't interest in being acquired.
Yahoo! has struggled against Google in terms of both ad revenue and search market share, with Yahoo’s share value falling some 40% over the past three months.
Google was by far the most-used US search engine in December, with a 58.4% market share, compared with 22.9% for No. 2 Yahoo and 9.8% for No. 3 Microsoft, according to data from ComScore.
In the letter to the Yahoo! board, Balmer said: "While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing."
Bamer said that Yahoo's decision at the time was based on the "potential upside" of its own plans and a "significant organizational alignment," led by the long- awaited overhaul to its search-advertising system dubbed Project Panama.
"A year has gone by, and the competitive situation has not improved.”
Microsoft noted the market for online advertising is "increasingly dominated by one player. Together, Microsoft and Yahoo can offer competitive choice while better fulfilling the needs of customers and partners."
The company added the deal would also result in "combined engineering talent to accelerate innovation," a hint that Microsoft can't alone take on Google with its current staff. Microsoft said it would offer "significant retention packages" to employees, executives and engineers across Yahoo.
Commenting on the proposal, Neil Morgan, VP EMEA channels and marketing, at Omniture, said: “Microsoft’s proposed acquisition of Yahoo today shows that the old order have finally grasped the significance of the Internet.
“Following other acquisitions by Microsoft and Google of Acquantive and Doubleclick respectively, what this really means to advertisers is a significant reduction in choice of online media. As online media buying moves to a duopoly it will become ever more important to have an independent approach to the measurement of the results of digital advertising.”
The offer, for $31 a share in cash and stock, represents a 62% premium to Yahoo's closing price Thursday.
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icrosoft expects at least $1bn in annual cost savings and revenue enhancements from a deal, which it says could close in the second half of the year.
Neil Jackson, Search Director at Tamar which advises brands on search strategies said: “Independently Yahoo! and Microsoft have failed to close the gap on Google, in fact, they have failed to plug the dam that is leaking users to Google. While there are undoubtedly great synergies to be had from aligning the businesses do two wrongs make a right? Why would they get the right answer by working together when working apart they were going backwards?
“The offer that Microsoft has made for Yahoo! is considerable and paying a 62 per cent premium on current share price seems a lot given the current financial climate, but Microsoft will be in it for the long haul. On the plus side, anything to challenge Google's UK dominance would be healthy and encouraged. Ultimately it will be users who decide who succeeds and so far Google is winning hands down.”