http://money.cnn.com/news/newsfeeds/articles/djf500/200802010834DOWJONESDJONLINE000474_FORTUNE5.htm

NEW YORK -(Dow Jones)- Microsoft Corp. (MSFT) went public Friday with an offer to buy Yahoo Inc. (YHOO) for $44.6 billion, a move designed to create a more credible competitor to industry leader Google Inc. (GOOG) and deepen Microsoft's position in the market for online business software.

The unsolicited approach, outlined by Microsoft Chief Executive Steve Ballmer in a letter sent Thursday night to Yahoo's board and published Friday, is aimed at pressing Yahoo to agree to a combination it rejected a year ago. Yahoo acknowledged the proposal and said it would be evaluated "carefully and promptly."

The offer, for $31 a share in cash and stock, represents a 62% premium to Yahoo's closing price Thursday. It comes offer comes as Yahoo continues to struggle against Google in the race for online-advertising revenue and Internet- search market share despite efforts to upgrade its systems. Yahoo's shares have lost about 40% of their value over the past three months.

"While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing," Ballmer said in the letter to Yahoo's board.

Yahoo shares jumped 55% to $29.72 in premarket trading. Microsoft fell 4.7% to $31.08 premarket. Google, down about 6% premarket after issuing weaker than expected fourth-quarter results late Thursday, and saw its stock slip further after the announcement and was recently down nearly 7%. The announcement pushed U.S. stock index futures higher.

A deal would bring together two pioneers in their respective industries that stagnated as new competitors did a better job of adapting to changing technology and the habits of users. It's unclear how the combination of those cultures would work. Microsoft is widely viewed as a lumbering technology giant struggling to become more nimble, while Yahoo is trying to recapture the spark of its more free-wheeling days as an Internet startup.

Yahoo, however, would add a commanding presence in Internet content and users to Microsoft's deep pockets and near monopoly over the desktop software that enables most routine computer use.

"In our view there is a compelling case that says yes, although the risks of a culture mismatch and potential employee attrition would have to be managed carefully," Goldman Sachs analyst Sarah Friar said in a note. Goldman Sach has an investment banking relationship with Microsoft. It wasn't immediately known whether Goldman is advising on the Yahoo offer.

Microsoft said Yahoo holders would be able to trade each of their shares for $ 31 in cash or 0.9509 of a Microsoft share, pro-rated so that no more than half of the overall purchase price is paid in cash. The deal values Yahoo at 65 times earnings. Currently, it trades at 40 times earnings, according to FactSet Research. Yahoo shares haven't traded at $31 since November.

The companies held talks about partnering or merging in late 2006 and early 2007. Those talks included the potential of a merger proposal, but Yahoo told Microsoft in February it wasn't interest in being acquired.

He noted Yahoo's decision at the time was based on the "potential upside" of its own plans and a "significant organizational alignment," led by the long- awaited overhaul to its search-advertising system dubbed Project Panama.

"A year has gone by, and the competitive situation has not improved," Ballmer wrote.

Microsoft noted the market for online advertising is "increasingly dominated by one player. Together, Microsoft and Yahoo can offer competitive choice while better fulfilling the needs of customers and partners."

Microsoft and Yahoo each have struggled to get bigger in Internet searches and search advertising despite heavy investment. Google was by far the most-used U.S. search engine in December, with a 58.4% market share, compared with 22.9% for No. 2 Yahoo and 9.8% for No. 3 Microsoft, according to data from ComScore Inc. (SCOR).

"The fact is that in this particular industry, scale matters," Kevin Johnson, Microsoft's president of platforms and services, said in an interview.

The company added the deal would also result in "combined engineering talent to accelerate innovation," a hint that Microsoft can't alone take on Google with its current staff. Microsoft said it would offer "significant retention packages" to employees, executives and engineers across Yahoo.

Microsoft expects at least $1 billion in annual cost savings and revenue enhancements from a deal, which it says could close in the second half of the year.

Takeover speculation fired back up after Yahoo late Tuesday posted a drop in fourth-quarter net income and issued a 2008 outlook that fell short of analysts' expectations. Goldman Sachs analyst John Marshall, in a report published Friday, said the chances of a Microsoft bid for Yahoo had risen and recommended buying options on Yahoo. He cited the growing importance of the online services business to Microsoft. The software giant also cited that business, which involves licensing companies to use constantly updated software applications accessed via the Internet.

Speculation about a Yahoo buyout has swirled since last year, when Microsoft's interest in such a deal was reported. Buying Yahoo would theoretically place Microsoft as significant competitor in the Internet search market, where it has so far lagged behind both Yahoo and Google. Microsoft, which has thriving software businesses that could fund a much deeper foray into Internet markets, hadn't actively dispelled rumors it was considering an acquisition of Yahoo.

Microsoft said it will host a conference call to discuss the proposal at 8:30 a.m. EST. The company is to present a strategic update for analysts Monday in New York.

:eek:


Just what we needed, Microsoft taking over more things. :mischief:

That sucks. Can we still say sucks on this network?I've been using Yahoo mail for years, because hotmail (now by Microsoft) sucks. Time to move to gmail, I guess. Anyone use that?

As much as I admire Bill Gates for his charitable efforts, his business ventures are evil incarnate. exaggeration for effect

why on earth does microsoft need to have yahoo? just to eliminate mainstream competition?

That sucks. Can we still say sucks on this network?I've been using Yahoo mail for years, because hotmail (now by Microsoft) sucks. Time to move to gmail, I guess. Anyone use that?I'm using Yahoo mail too, and I feel with you, as gmail's privacy policy is "don't be evil" + "retain your records a lot". Maybe I'll have to look for an indie mail provider.

As much as I admire Bill Gates for his charitable efforts, his business ventures are evil incarnate. exaggeration for effect
Don't forget that some of the charitable efforts include free Windows licenses or IT training restricted to schools using only Windows, etc, etc.

That sucks. Can we still say sucks on this network?I've been using Yahoo mail for years, because hotmail (now by Microsoft) sucks. Time to move to gmail, I guess. Anyone use that?

As much as I admire Bill Gates for his charitable efforts, his business ventures are evil incarnate. exaggeration for effect

If MS buys Yahoo, they aren't going to shut down any of Yahoo's services, that would be senseless, as then some users would leave and go to competitors.

why on earth does microsoft need to have yahoo? just to eliminate mainstream competition?

To compete with Google.

It looks like Microsoft is buying right and left, not too long ago they offered about 1,2 billion for Fast Search and Transfer.

Yahoo hasn't been loosing a lot of their money lately. Their stock dropped 10% in 1 day on wednesday I believe. If this purchase continues to develop, msft stock is looking to be a pretty lucrative buy. They can definitely afford to purchase yahoo from the look of their financial statements.

btw, if msft buys yahoo, thousands of jobs could be saved from yahoo's current downsize plans.

Same thing happened with the railroads. People bought out people before the government passed laws against that.

why on earth does microsoft need to have yahoo? just to eliminate mainstream competition?

Because of the economies of scale, the two companies combined would have over 54,000 employees, I guarantee if this merger goes through 5,000 will be fired in a year. Reducing costs.

I wouldn't want to be a Yahoo employee if this merger goes through.

Same thing happened with the railroads. People bought out people before the government passed laws against that.

True, but microsoft isn't really gaining a larger market share in their current market. They already have pretty much a monopoly in what they do with computer software (windows). If they buy yahoo, they will enter a new market and take market just like what microsoft did when they entered the gaming console market by investing in their xbox.

btw, if msft buys yahoo, thousands of jobs could be saved from yahoo's current downsize plans.

Saved??? Are you nuts? The whole point of mergers is to save costs.

They are going to fire even more people. The office personnel of Yahoo is pretty much fired, only enginneers have any chance on surviving.

I wouldn't be surprised if the Yahoo headquarters were to shut down.

Because of the economies of scale, the two companies combined would have over 54,000 employees, I guarantee if this merger goes through 5,000 will be fired in a year. Reducing costs.

I wouldn't want to be a Yahoo employee if this merger goes through.

Could you explain the economies of scale aspect of what you just said? I don't quite understand how it applies to this purchase.

That sucks. Can we still say sucks on this network?I've been using Yahoo mail for years, because hotmail (now by Microsoft) sucks. Time to move to gmail, I guess. Anyone use that?

I use Gmail, it's great I have nothing to complain.

why on earth does microsoft need to have yahoo? just to eliminate mainstream competition?

To compete with Google in the search market. Google is probably is, no, definitely is, the biggest threat to microsoft.

Could you explain the economies of scale aspect of what you just said? I don't quite understand how it applies to this purchase.

Wikipedia:
"Economies of scale characterizes a production process in which an increase in the scale of the firm causes a decrease in the long run average cost of each unit."

R&D for one, right now there is a team on Yahoo and a team on Microsoft researching on the same thing, with the merger you would only have one team. The extra team could either be used to research something else or be fired.

Human Resources, maintenance, hardware acquisition, electric bills, data centers all those areas would benefit from cost reductions brought by economies of scale.

Wikipedia:
"Economies of scale characterizes a production process in which an increase in the scale of the firm causes a decrease in the long run average cost of each unit."

R&D for one, right now there is a team on Yahoo and a team on Microsoft researching on the same thing, with the merger you would only have one team. The extra team could either be used to research something else or be fired.

Human Resources, maintenance, hardware acquisition, electric bills, data centers all those areas would benefit from cost reductions brought by economies of scale.

Ah, I see.

I wasn't aware that Microsoft and Yahoo are developing the same project, do you have any extra info about what it is?

Ah, I see.

I wasn't aware that Microsoft and Yahoo are developing the same project, do you have any extra info about what it is?

IMO for starters you have both companies researching ad placement on web sites, also researching ad placement according to web searches.

If until now, let's say, you had 2 different teams of 2,000 engineers each competing, you can now have 1 single team of 4,000 engineers collaborating.

Also Microsoft could now justify investing billions on ad placement research because they would have 33% of the market and not just 10% as it is now.

YHOO is up 45%.... dammit! Missed a huge opportunity....

YHOO is up 45%.... dammit! Missed a huge opportunity....

Not really. You'd of had to known that MS was going to be making this offer.

Plus, given MS history w/ the Dept of Justice, don't assume this will pass anti-trust muster.

It looks like Microsoft is buying right and left, not too long ago they offered about 1,2 billion for Fast Search and Transfer.

Nothing new there. (http://en.wikipedia.org/wiki/List_of_companies_acquired_by_Microsoft_Corporatio n)

Because of the economies of scale, the two companies combined would have over 54,000 employees, I guarantee if this merger goes through 5,000 will be fired in a year. Reducing costs.

I wouldn't want to be a Yahoo employee if this merger goes through.

Seeing as how MS already has nearly 80,000 employees, it pretty certain their combined company would have well over 54,000. ;)

True, but microsoft isn't really gaining a larger market share in their current market. They already have pretty much a monopoly in what they do with computer software (windows). If they buy yahoo, they will enter a new market and take market just like what microsoft did when they entered the gaming console market by investing in their xbox.

It isn't a new market, Microsoft has been a player with MSN since 1995, they're just not being particularly effective.

Seeing as how MS already has nearly 80,000 employees, it pretty certain their combined company would have well over 54,000. ;)

54,000 in the US alone, I quoted from CNNMoney.

http://money.cnn.com/2008/02/01/technology/microsoft_yahoo/index.htm?postversion=2008020111

Not really. You'd of had to known that MS was going to be making this offer.

Plus, given MS history w/ the Dept of Justice, don't assume this will pass anti-trust muster.

The yahoo stock dropped 10% on wednesday, if my money wasn't tied into DIS GE and TWX, I would have bought into yahoo that day. Similar story with several banks I've been watching, if I have money, I would put my money into those companies right now. I just wish the writer's guild strike will end already so I can loosen up my money, there are so many opportunities in the market opening up in the market in these volatile few days, I bet day traders are reaping in some serious doe.

No ty when Microsoft offers 88 billion then i would think about it!

No ty when Microsoft offers 88 billion then i would think about it!

Yahoo! is only worth $37 billion, and that is after today's stock spike. Take 45% off of that, and the number you get would be Yahoo!'s worth as of yesterday's close.

So around $20 billion.

ridiculous. I hate Yahoo. Now I hate Microsoft. What a stinker stock. MSFT lost 6% today, meanings it's market cap just shrunk by $18 Billion. It needs to lose more, a lot more. Yahoo sucks, period.

No ty when Microsoft offers 88 billion then i would think about it!

:lol:

As the Bill Gates on The Simpsons said, "I didn't get rich by writing checks."

$44 600 000 000 for a company that isn't really generating profits and has low growth expectations. They must be desperate to gain more influence.

$44 600 000 000 for a company that isn't really generating profits and has low growth expectations. They must be desperate to gain more influence.

This is true, Yahoo was only expected to make 45 cents per common share this year. If that held steady it would take Microsoft ~55 years to make a profit.

I suppose they're that desperate to put up some kind of front against Google.

People in Microsoft know that the PC is coming to an end. The future for software makers lies in web applications, and people will use whatever browser-like platform they have available to access their data and software on-line. This has been done in the enterprise market because it’s the most effective way to manage data and deploy software (in most cases, at least), and will be embraced also by home users who have, by now experienced the difficulty of maintaining software and avoiding data loss (their emails, pictures, documents, etc).

Where Microsoft is wrong is in fearing that Google will manage to leverage its dominance in search engines to threaten Microsoft’s software sales. Those sales will decline, whatever Microsoft does. But Google, or any other company based on a search engine, is not necessarily well positioned to take Microsoft’s place as a software provider. Within large companies (interested in protecting their business data) software will either be internally developed (the easier applications, and those with very specific business logic) or ordered from a few large suppliers, for the complex but relatively standard software packages. Microsoft is already busy securing this with the on-line collaboration built into its latest Office version (including Office Live).
Smaller companies and individuals will use on-line services for standard needs, or hire local software development companies for other, more specific, needs.

Google really can’t make money from selling software on-line. It can only sell information, and even from that it has been forced to get its revenue mostly form advertisement – charging directly for the information would drive users away and raise inconvenient questions about “ownership” of information. Yahoo is in the same situation.

This move seems to me a huge mistake by Microsoft, almost like TimeWarner’s merger with AOL (except that this at least is not Yahoo buying Microsoft).

Saved??? Are you nuts? The whole point of mergers is to save costs.

They are going to fire even more people. The office personnel of Yahoo is pretty much fired, only enginneers have any chance on surviving.

I wouldn't be surprised if the Yahoo headquarters were to shut down.

Not going to happen. Not a chance on shutting down the hq. Redmond campus is filled far beyond capacity and the massive campus expansion has already been filled even though its not completed. They even had to send some people to Bellevue and Seattle and are considering a Seattle campus. They also recently bought and filled all the neighboring hqs in Redmond including Safeco, Eddie Bauer etc. This is all with many office spaces temporarily doubled up and pressure from the competitive Google perks. Simply put there isn't room for even a fraction of the Yahoo hq in the region.

Also the company is short on people as it is. They don't have the man power to replace administrative duties at Yahoo. They are short on engineers too and since they have just about always been in this position they usually cut costs by other means than firing people. If anything you will just see people get shuffled to different positions.

BWAHAHAHAHA!!!!! Darn you discovered our evil plan!!!!!

why on earth does microsoft need to have yahoo? just to eliminate mainstream competition?

Yahoo! is only worth $37 billion, and that is after today's stock spike. Take 45% off of that, and the number you get would be Yahoo!'s worth as of yesterday's close.

So around $20 billion.

Oh yeah, only $37 Billion...:lol:

Google ain't going down without a fight, though. Microsoft won't kill Google as easily as they've killed all else. In fact I doubt they're going to kill it at all.

Good, I hope they can finally put up a decent competitor to adsense, would make earning a living easier for me.

I'm all for this merger, does that make me an evil man?

Google vs Microsoft

The showdown....

Good, I hope they can finally put up a decent competitor to adsense, would make earning a living easier for me.

I'm all for this merger, does that make me an evil man?
Yes it does :p

But seriously, this would just add to M$'s monopoly, quite needlessly too. I guess it does show that M$ is getting desperate.

Google should buy Yahoo! fast, since Microsoft will eventually kill them simply by smothering them with crap. Googe is better than Yahoo!, Hotmail, Live Search, everything. It should live.

I doubt Google could afford to buy Yahoo!

Well they could borrow money, it would in the end bring them back more, and save them from Microsoft's crapflood.

Well they could borrow money, it would in the end bring them back more, and save them from Microsoft's crapflood.

There wouldnt be much of a point though. They're doing fine as is, and the best thing would probably be to convince Yahoo! not to sell out to M$ instead of actually buying it.

But Yahoo! has picture ads, and Google has yet to develop them. Eventually this will kill Google. Maybe in 10 years, but eventually Google will die-unless they act fast.

If the need arises, google will create picture ads, but so far they seem to be doing rather fine.

I heard on the radio that they're having a bit of trouble with it. But that was on NPR, so I dunno.