Friday, February 01, 2008

Microsoft Makes $44.6 Billion Offer for Yahoo!

Microsoft has made a huge bid for Yahoo!, which could give the company a significant lift in the web search and online advertising fields as it competes with Google.


According to Reuters, software behemoth Microsoft has made a $44.6 billion offer to buy Yahoo! in an effort to combat competitor Google. Microsoft apparently offered $31 per share for Yahoo, representing a 62 percent premium over the company's closing stock price on Nasdaq Thursday. Yahoo! said it's currently evaluating the bid.

If the deal goes through, it would be the biggest Internet merger since the Time Warner-AOL combination. Currently comScore estimates Google's share of the Internet search market is around 77 percent compared to just 16 percent for Yahoo! and 3.7 percent for Microsoft. Furthermore, Microsoft, which owns in-game advertising specialist Massive Inc., has said that online advertising is "increasingly dominated by one player," meaning Google – which bought in-game ad firm Adscape Media last February for $23 million.

"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 Microsoft Chief Executive Steve Ballmer.

If the deal goes through, Yahoo! shareholders would be able to choose to get $31 cash, or 0.9509 of a share of Microsoft common stock. Also, the deal in aggregate must consist of one-half cash and one-half Microsoft common stock.

Analysts aren't so sure about the deal. "To me, the premium seems exorbitant, for what is a dwindling business. I personally don't see how the synergies of Microsoft-Yahoo is going to take on Google," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC.

Mark May, analyst at Needham & Co., commented that the price might not actually be high enough. "I would not be surprised to see this bid have to be raised over time," he said. "I think there are companies out there like Comcast (Corp) and Viacom (Inc) and others that still need to address the emergence of online media and haven't. So there are clearly other strategic companies out there."

If Microsoft ever does launch a web browser for the Xbox 360, a Yahoo! purchase could certainly be leveraged to enhance the service. Even without a browser, there could be ways in which Yahoo! functionality could be integrated into the popular Xbox Live service.

via GameDaily

Jason Kiwaluk

Mower & Shoveller,

Ecommerce | Adtech | Innovation | Strategy

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