Microsoft Bids On Yahoo

February 1, 2008
Trying to Compete with Google

In what Bloomberg states is “the biggest-ever technology takeover,” Microsoft made an unsolicited $44.6 billion bid for Yahoo. That figure marks a 62% premium of Yahoo’s stock price as of yesterday’s closing.

It seems this bid is the culmination of the roller-coaster ride Yahoo has been on the past month: first, according to one report, the Yahoo CFO Susan Decker stated, “We don’t think it’s reasonable to assume we’re going to gain a lot of share from Google […]. It’s not our goal to be No. 1 in Internet search. We would be very happy to maintain our market share.” (as of September of 2007, Yahoo’s share of search traffic was approximately 19.5%, followed by MSN at 12%, compared to Google’s 54%). Second, Chairman and ex-CEO Terry Semel left the Yahoo board. He is credited it reviving the company and then “losing touch,” not being able to gain on Google’s dominance as quickly as others had hoped.

This hope was one of the reasons Yahoo ditched merger talks last year: “In a letter to Yahoo’s board, Mr. Ballmer wrote that the two companies discussed a possible merger, as well as other ways to work together, in late 2006 and 2007. Mr. Ballmer said that in February 2007, Yahoo decided to end the merger discussions because its board was confident in the company’s ‘upside.'” Now that that potential “upside” has fizzled out, it may be we’ll see this bid actually go through, especially since the search advertising market could possibly grow to $80 billion by 2010.


Found a copy of the letter sent to Yahoo by Microsoft, and a great analysis of the possible merger on Forbes (the title? “A Messy Marriage”… gotta love it).


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