Microsoft Bids USD 44.6 Billion To Acquire Yahoo!
February 1st, 2008
TechCrunch report that Microsoft has made an official bid to acquire Yahoo! The offer of $44.6 Billion values Yahoo! at $31 per share, a 62% premium on Thursday closing price.
In a letter to the board of directors at Yahoo!, Microsoft CEO Steve Ballmer says, “Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers. In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo! should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. 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.”
The first thing that springs to mind when reading this is that the rumours were true - in 2007 and even back in 2006 the two companies were considering ways to partner or join forces!
Another post on TechCrunch UK discusses the regulatory implications of such a merger. Microsoft is no stranger to regulatory scrutiny. The new merger will just add to the heap of inquiries already underway in the EU. The dynamics of this merger will be quite interesting, though…
Yahoo! Search Marketing is the most desirable asset that Microsoft will obtain as a result of this merger. The combined popularity of Microsoft Live Search and Yahoo! Search in the UK and Europe will still amount to less than 20% (even less than 10% in many countries) of the total search market. So by no means could this be considered anti-competitive.
Email and instant messaging, however, are a different story. The combined popularity of Yahoo! Messenger and MSN Messenger as well as Hotmail and Yahoo! Mail would dwarf all the competition. While the services are free, they do represent significant ad inventory, which could irk Google greatly.
Kelkoo and MSN Shopping are both extremely popular shopping portals that were once competitors, but will now join forces. This could create minor issues from a regulatory stand point, but the greater likelihood is the eventual absorption of the Kelkoo brand in the larger MSN portal.
Microsoft’s offer could not have been better timed. Yahoo! recently announced poor results and a bleak outlook, causing their stocks to fall (NSDQ: YHOO). The news has been received well by Wall Street, with shares of both Yahoo! and Microsoft (NSDQ: MSFT) rising in early hours trading and the overall market receiving a much-needed boost of enthusiasm.
If the two Internet giants do merge, it is not clear what will happen to the workforce. Yahoo! will most likely go ahead with the layoffs announced earlier this week. And as the two companies align departments, more downsizing is likely to occur in order to minimize overlap in job functions.
An interesting question stemming from this latest piece of news is ‘what will this merger mean for the search and search marketing industry’?
Update:
An official press release from Yahoo! states that the board have confirmed receipt of the offer from Microsoft and are considering the offer.
Tags: acquisition, microsoft, microsoft adcenter, yahoo, yahoo search marketing
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5 Responses to “Microsoft Bids USD 44.6 Billion To Acquire Yahoo!”
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February 4th, 2008 at 10:15 am
This merger (if it happens) is not going to help MSN to defeat Google in any way. On the contrary I think Google will be happy to see these two companies getting merged as earlier it has two competitors but now there will be only one.
February 4th, 2008 at 10:26 am
Alas! Microsoft bids to acquire Yahoo! Now google has to build a new strategy to face Microsoft & Yahoo together in form of Mahoo! What a cool name.
March 5th, 2008 at 3:04 am
this bid has been increasing popularty of yahoo on the search engine, now people will visit on yahoo more and more and yahoo visitor will go very high
Thats very good for yahoo
April 14th, 2008 at 1:14 pm
[…] This was never going to be a straightforward acquisition and we all knew that. However, Microsoft’s bid to acquire Yahoo! has just turned more complicated with a whole new set of competing factions coming out of the woodwork. Google, AOL , News Corp. and Time Warner have all re-emerged as significant players. […]
May 6th, 2008 at 5:25 pm
[…] Also, in view of Yahoo!’s imminent deal with Google, Microsoft feel that the acquisition of Yahoo! would involve tremendous headaches with anti-trust laws - a combined Google and Yahoo! ad platform would control over 80% of the U.S. search market - which would bring hassles that are quite clearly unwanted by any purchaser, including Microsoft. […]