Posted by: h4ck@lyst | February 2, 2008

Microsoft offers $44.6bn to buy Yahoo

Microsoft, with the reputation of being among the world’s most hardball companies, has made a massive $44.6 billion bid to acquire internet veteran Yahoo in an effort to challenge their mutual competitor, the omnipresent Google.
Microsoft’s bid comes at a time when Google has raced ahead of the competition in the ad revenue rich search space, and Yahoo, a one-time leader and rival, is in the doldrums. Microsoft’s unsolicited offer of $31 per Yahoo share represents a 62% premium over its closing stock price on Thursday.
Yahoo has said it will consider the offer, but most experts think the buyout will be a shooin, given Yahoo’s weak position arising from poor results and a four-year low stock price. The company also announced a 1,000-person lay-off this week.
If Microsoft’s bid succeeds, it will be the company’s biggest acquisition and the biggest merger in the technology space after Time-Warner bought AOL for $180 billion in the heyday of the technology boom. Analysts say the merger will result in a potent competitor for Google in the lucrative web search and advertising market.
Although Yahoo, founded by two Stanford graduates, was one of the first companies to popularize web searches going back to the mid-1990s, upstart Google has stormed ahead in the last few years. Microsoft, which is the world’s dominant
software maker, has not been able to gee up its search capability either.
Microsoft evidently expects to challenge Google with Yahoo’s legacy and its managerial skills. Google’s share of the US web search market is currently estimated at 56% by Nielsen Online as compared to 17% for Yahoo and 13% for Microsoft.
Microsoft acquires anywhere from half-a-dozen to a score of companies each year. Its last acquisition in 2008 was Calista Technologies, a desktop visualization solution company co-founded by Indian techie Anil Kumar. But the Redmond giant has never attempted something on this scale.
Microsoft’s attempt to buy out Yahoo is not new either. The two sides are said to have pursued merger discussions for at least three years, but the offer always came up short. Now, mugged relentlessly by Google’s continuing strides and dominance in the market, the two are expected to team up for a fight.
Assuming that the merger comes through, no one expects any spectacular fireworks,much less immediate results given Microsoft’s past record. The Redmond veteran’s reputation as a destroyer of companies has given rise to the motto ‘Embrace, Extend, and Extinguish’ to describe its tactics. It famously bought out Sabeer Bhatia’s Hotmail in the late 1990s, but failed to make it the market leader in the e-mail space.

Graph of Microsoft and Yahoo share prices



  1. Freedom is again losing the game…

    None but shareholders have something to win from Micro$soft-Yahoo! merge.

    IMO – This is really a bad news for the web.

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