Microsoft bids US$44.6bn for Yahoo!

1 Feb 2008

Yahoo! chief executive and co-founder Jerry Yang received an offer he may or may not be able to refuse as Microsoft CEO Steve Ballmer made a proposal for “a business combination of Microsoft and Yahoo!”, meaning the Redmond-based tech powerhouse is seeking to take over Yahoo!.

Late yesterday, just before Microsoft went public with its takeover offer of US$44.6bn for Yahoo!, the company’s former chief executive Terry Semel resigned from his position on the board.

This is the latest in a series of dramatic developments for internet search firm Yahoo! this week as net income for Q4 fell from US$269m last year to US$206m, followed by the company’s decision to lay off 1,000 of its workers.

Microsoft said in its proposal that the offer would represent a 62pc premium for Yahoo! shareholders, judging by the closing price of Yahoo! stock on Thursday.

“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 Ballmer.

“We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”

This is not the first time Microsoft has asked Yahoo! to join them: “In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together,” said Ballmer in a letter to Yahoo!.

“The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs,” said Kevin Johnson, president of the platforms and services division of Microsoft.

“The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers.”

After sending the letter of offer to Yahoo! headquarters Microsoft published it publicly, also announcing their intention to hold a press conference later today at which Steve Ballmer, Chris Liddell, chief financial officer, Kevin Johnson, president of PSD and Ray Ozzie, chief software architect will all be present.

At the conference, Microsoft will discuss the online marketing opportunities of the two companies combined, explaining how the online marketing space is projected to rise from its current worth of US$41bn in 2007 to an estimated US$78bn by 2010 – a market the company is keen to gain a foothold in with the synergy created by a Microsoft-Yahoo! merger.

By Marie Boran