Microsoft offers $44.6bn to buy Yahoo

Washington: Microsoft, with the reputation of being among the world’s most hardball companies, has made a massive $44.6 billion bid to acquire internet veteran Yahoo in an effort to challenge their mutual competitor, the omnipresent Google.
Microsoft’s bid comes at a time when Google has raced ahead of the competition in the ad revenue rich search space, and Yahoo, a one-time leader and rival, is in the doldrums. Microsoft’s unsolicited offer of $31 per Yahoo share represents a 62% premium over its closing stock price on Thursday.
Yahoo has said it will consider the offer, but most experts think the buyout will be a shooin, given Yahoo’s weak position arising from poor results and a four-year low stock price. The company also announced a 1,000-person lay-off this week.
If Microsoft’s bid succeeds, it will be the company’s biggest acquisition and the biggest merger in the technology space after Time-Warner bought AOL for $180 billion in the heyday of the technology boom. Analysts say the merger will result in a potent competitor for Google in the lucrative web search and advertising market.
Although Yahoo, founded by two Stanford graduates, was one of the first companies to popularize web searches going back to the mid-1990s, upstart Google has stormed ahead in the last few years. Microsoft, which is the world’s dominant software maker, has not been able to gee up its search capability either.
Microsoft evidently expects to challenge Google with Yahoo’s legacy and its managerial skills. Google’s share of the US web search market is currently estimated at 56% by Nielsen Online as compared to 17% for Yahoo and 13% for Microsoft.
Microsoft acquires anywhere from half-a-dozen to a score of companies each year. Its last acquisition in 2008 was Calista Technologies, a desktop visualization solution company co-founded by Indian techie Anil Kumar. But the Redmond giant has never attempted something on this scale.
Microsoft’s attempt to buy out Yahoo is not new either. The two sides are said to have pursued merger discussions for at least three years, but the offer always came up short. Now, mugged relentlessly by Google’s continuing strides and dominance in the market, the two are expected to team up for a fight.
Assuming that the merger comes through, no one expects any spectacular fireworks,much less immediate results given Microsoft’s past record. The Redmond veteran’s reputation as a destroyer of companies has given rise to the motto ‘Embrace, Extend, and Extinguish’ to describe its tactics. It famously bought out Sabeer Bhatia’s Hotmail in the late 1990s, but failed to make it the market leader in the e-mail space.
High-Profile Internet Deals 2000: AOL buys Time Warner for $164 billion creating AOL Time Warner
2007: Kohlberg Kravis Roberts (KKR) snaps up First Data Corp for $27.5 billion 2006: Google acquires YouTube for $1.65 billion 2002: eBay buys Paypal for $1.5 billion
2005: News Corporation acquires MySpaceparent Intermix for $580 million 1998: Microsoft buys Hotmail for $400 million SEARCH CHARGE MS-Yahoo to rev up Indian mkt With Merger, Microsoft Plans To Create More Revenue Streams In Country
Bangalore: Microsoft’s proposed buyout of Yahoo will redefine the dynamics of global internet space. Being one of the largest web-savvy consumer markets, India too will witness significant market changes, observe industry experts. Analysts also see it as the beginning of a consolidation phase in internet space, although the business is pretty new in India when compared to other markets. Interestingly, six months ago Goldman Sachs had done a Yahoo-buyout feasibility study for Microsoft through JP Morgan Securities. The deal was then valued at $50 billion.
For Microsoft and Yahoo, India probably could be the most vibrant and dominating geography among the rest of the Bric region. “Microsoft is clearly trying to create additional revenue streams and additional people-front through this acquisition. With this, the country will have more number of researchers and developers working on newer internet technologies. The deal will simply bring more action in the internet product space in the country,’’ said Pavan Goswami, an industry expert.
Anand Lavi, partner, Tholongs, an offshore advisory firm said, “From an Indian perspective, Microsoft is a very popular brand. The deal will enhance the country’s internet user base and internet experience of its netizens. It will also significantly expand the internet landscape of the country.’’ Kanwaljit Singh, MD, Helion Ventures, said, large number of social networking sites are becoming popular. Initiatives like Second Life (web2.0) are also expanding the internet market. “This trend is going to be huge thing in India wherein the Microsoft-Yahoo combine would be playing a dominant role along with the number one player Google.’’ The deal makes interesting synergy for Microsoft and Yahoo as both have significant presence in the country, adds Sridhar Mitta, MD, e4e.
(with inputs from Anshul Dhamija)
WHY YAHOO LOGIN?
Microsoft and Yahoo struggle to compete with Google for the lucrative online advertising market, currently worth $40 billion and expected to grow to $80 billion by 2010. Google has cornered around 40% of US online ad share
Yahoo shares have lost around 30% of their value in the past year, while Google shares have gained, despite reporting a slowdown in fourth-quarter revenue growth.
The $31-a-share offer represents a 62% premium for shareholders above the closing price of Yahoo stock on Thursday
WHO GAINS THE MOST?
The deal is a win-win situation for both Microsoft and Yahoo, and it will change the internet landscape, giving Google a serious competitor at a time when it seemed that its lead in all things internet was unassailable
SPAM JAM
One potential hurdle to a Yahoo and Microsoft merger, after the nod from Yahoo itself, would be antitrust concerns, especially from the European Union
MY SPACE NOT YOURS YET
“We are yet to hear anything from our Sunnyvale office. MS’ bidding is not a new thing for us, but we are not sure if it’s actually done this time. Well, none of us is overly excited as we are not going to be bought by an internet firm, but a software one,’’ said one of the Yahoo employees in Bangalore. Yahoo India was in trouble some time ago facing accusations of plagiarism and thereafter facing an exodus of top employees including its CEO, George Zacharias. Currently, Keith Nilsson, (head) emerging markets, based in Singapore, is in charge of India. TNN
DESI SHARE Google 49.6% Yahoo 24% MS 9% AOL 6% Others the rest