Source:
http://money.cnn.com/2008/02/01/technology/microsoft_yahoo/?postversion=2008020109
----
Microsoft bids
$45 billion for Yahoo
Software giant makes cash and stock offer of $31 a share, a
62% premium from Yahoo's closing price on Thursday.
NEW YORK (CNNMoney.com) -- Microsoft Corp. made an unsolicited
$44.6 billion cash and stock bid for Yahoo on Friday, a deal that
could shake up the competitive and lucrative market for Internet
search.
The deal would pay Yahoo shareholders $31 a share, which represents
a 62% premium from where Yahoo stock closed on Thursday.
Steve Ballmer, Microsoft's chief executive, called the move the
"next major milestone" for the software giant.
"We are very, very confident this is the right path for Microsoft
and for Yahoo," he said.
Microsoft hopes to close the deal by the end of the year. Ballmer
said that Microsoft has been in "off and on" talks with Yahoo for
18 months and said he called Yahoo CEO Jerry Yang Thursday night to
tell him the bid was coming.
Microsoft made the bid early Friday. In a statement, the company
said the offer allows Yahoo shareholders to elect to receive cash
or a fixed number of shares of Microsoft common stock, with the
software giant's offer consisting of one-half cash and one-half
Microsoft common stock.
Shares of Yahoo (YHOO, Fortune 500) shot up 50% at the start of
trading Friday, while shares of Dow component Microsoft (MSFT,
Fortune 500) tumbled 4.5%.
In a statement, Yahoo acknowledged receipt of the offer and said
its board would evaluate the proposal "carefully and
promptly."
Both Microsoft and Yahoo have fallen far behind rival Google (GOOG,
Fortune 500) in the lucrative field of Internet search. Yahoo's
earnings and share of the online search market have badly trailed
Google.
In a letter it sent to Yahoo's board of directors, Microsoft
disclosed it had explored a Microsoft-Yahoo deal a year earlier,
only to be rebuffed by Yahoo, which said at that time it was
confident of the "potential upside" for Yahoo from operational
changes it planned.
"A year has gone by, and the competitive situation has not
improved," Ballmer.
On Thursday, former Yahoo CEO and current Chairman Terry Semel, who
opposed an earlier approach Microsoft made last year, resigned from
the Yahoo board.
Yahoo announced Tuesday it would lay off 1,000 employees by
mid-February, citing what CEO Yang described as "headwinds" facing
the company. It also reported lower fourth-quarter earnings that
still beat Wall Street's now modest expectations for the firm, but
it gave a 2008 revenue forecast that disappointed analysts.
Talkback: Is it time for Yahoo to
sell-out?
But even Google has run into recent problems. After the bell
Thursday it reported earnings that fell a penny a share short of
forecasts. The company reported a slowdown in its fourth-quarter
revenue growth, attributed partly to difficulty selling ads on
social networking sites.
Google shares have fallen 24% since hitting a record high $747.24
in early November. But Yahoo shares have lost more than a third of
their value over the same period.
Still, online advertising, particularly ads tied to Internet
search, is by far the fastest growing part of ad spending. That's
caused problems for traditional media, which have seen ad spending
fall.
Microsoft said it projects the online advertising market to grow
from over $40 billion in 2007 to nearly $80 billion by 2010.
In the letter to Yahoo's board, Microsoft said a tie-up would
achieve economics of scale while allowing combined research and
development efforts to achieve breakthrough products, particularly
in the growing areas of online video and mobile Internet
connections.
Microsoft said it intends to offer significant retention packages
to Yahoo engineers, key leaders and employees across the firm. It
said it believes the proposed combination would receive all
necessary regulatory approvals and expects that the proposed
transaction would be completed in the second half of calendar year
2008.
"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," Ballmer said in the company's
statement.
----
Looks like it's gonna be a Microsoft vs Google 1 v 1 thing in
the field of web search and online ads. Game over for Yahoo. And
Google ftw.