Posted February 1, 2008 8:14 am by with 22 comments

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Well, maybe there’s some good news to come out of Yahoo’s recent poor financial performance after all–Microsoft wants to buy it for $44.6 billion.

Nobody really saw this coming–you can’t count general speculation–so it will be interesting to see how this plays out. Microsoft offered $31 per share in cash and stock, representing a 62% premium on Yahoo’s recent stock price.

As AP reports:

Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock.

Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.

Now here’s the thing. This could become a hostile takeover very quickly. Microsoft CEO Steve Ballmer is already taking shots at Jerry Yang et al’s attempts to revitalize the company, saying “A year has gone by, and the competitive situation has not improved.”

Microsoft also predicts Yahoo’s board will turn down the offer. The Redmond software company is already trying to influence Yahoo’s stock holders by saying it “reserves the right to pursue all necessary steps to ensure that Yahoo’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

This really is the case of deciding which is the lesser of two evils here. I can understand why Yahoo might not want to join the ranks of Microsoft, but on the other hand, the company continues to struggle and there are few suitors that could make such a generous offer.

On the other side of the equation. Will buying a company that has failed to stand up to Google in any way, help Microsoft–which has equally poor performance. Do two losers, make a winner?

  • Dean

    It should be noted that while the premium offer of 62% sounds lavish, it is only equaly to recent Yahoo! share price. As early as last November Yahoo! share we at ~ $31. So its not an insanely rich offer.

    I agree that two losers don’t make a winner and I wonder if Google isn’t licking its chops waiting for MSFT to mess things up further should the acquisition go through. At the very least, a MSFT/Yahoo! integration would take months before it made an forward traction.

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  • 44.6 billion is completely overpriced imo.

  • Not familiar with the word “Pownce”…
    sounds like a bunch of yahoos won’t be enough
    to compete with Google.

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  • Will this improve Microsoft’s brand? No. Microsoft protects the mother ship (its OS). That’s why the transition to the web has been so difficult for them.
    Will this improve Yahoo’s brand? No. Would you trust Yahoo more knowing Microsoft owns it??
    Will it improve the end user’s experience with Yahoo? Unlikely. More cooks in the kitchen…

    In the U.S., Sears and KMart merged and made no impact on the leading retail giants.

  • It’s going to be interesting to see how this all shakes out. Assuming the takeover is successful it might turn the combined Yahoo/Microsoft search into a stronger competitor to Google.

    On the other hand if I have a choice between Microsoft and Google I’m probably going to choose Google. At the moment I frequently use several Yahoo properties including My Yahoo as my home page. I may not be so inclined to keep that home page if it’s Microsoft owned.

  • I have to agree with Steven. Although I’m sure the goal is that Microsoft’s takeover of Yahoo will allow them to actually compete at a higher footing with Google than either of them had been able to do separately, I still believe Google’s dominance will remain just as strong as it ever was. That’s not to say, however, that this buyout was a bad decision. I feel that it was highly advantageous for both parties involved.

  • @Bob – I had on the brain. 😉

  • So all their buying here is Yahoo traffic? Just kidding, but I wonder if this happens what (if anything) changes the way the SERPs appear on both websites

  • If Microsoft is smart, they’ll keep Yahoo as the name for their internet brand. After all, what with MSN and Windows Live, they neither have a strong brand, nor can they make up their mind what to use.

  • If you ask me, I think Yahoo stands the best chance if it were to join forces with Facebook and NOT Microsoft.

    I hope that Yahoo doesn’t let this thing through.

  • Mahoo! ;^)

  • This has come up every 6 months or so of late. I was asked recently who I thought were able, if anyone, to compete with Google. Microsoft have been developing their search offering recently, particularly within the exploding Chinese market, and I think that this move is a sensible one for them.

    Google have never really got the hang of community sites and Microhoo! could really stand to take the search giant on as a large quantity (if not quality) of search moves away from traditional search home pages.

    Certainly it seems that Microsoft are the ones who would benefit most from this acquisition.

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  • It seems, that the antiexclusive committee will not allow to carry out this bargain.

  • If they do their job right who knows, there may finally be a serious competitor for G but getting there will prove to be quite a challenge 🙂

    Alan Johnson

  • I always liked Yahoo as a company. Not a fan of msft. I sure would trust Yahoo a lot less if microsoft was to head it.

  • Zen

    This offer will just make things easier for the big G, now they’ll only have to buy one company instead of two to get full marketshare (A.K.A. monopoly).

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