Microhoo Or Yahsoft

Microsoft Corp. on Friday offered to buy search engine operator Yahoo! Inc. for US$44.6 billion, in an effort to better compete with online advertising giant Google Inc. Microsoftsaid its "compelling" offer of US$31 a share, half cash and half stock, represents a 62% premium on the closing price of Yahoo US$19.18on Thursday.

In a brief statement, Yahoo said its board of directors "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."

Yahoo shares jumped 57% to $30 in preopen U.S. trades. Microsoft shares were down 5%, while Google stock dropped 6%. Google poses a clear long-term threat to Microsoft's business, but Microsoft and Yahoo together would make a significant competitor who could fight back.

Google dominates the Internet-search business with a 56.3% market share, according to the latest report by ratings agency Nielsen Online. Yahoo! (17.7%) and Microsoft (13.8%) combined for a market share of 31.5% in December.Microsoft had tried to buy Yahoo last year, but Yahoo balked. The sharp decline in Yahoo's stock - it recently touched its lowest point since October 2003 - made a potential purchase more inviting for Microsoft. Earlier this week, Yahoo posted a sharp drop in fourth-quarter profit and said it would trim its workforce.

Microsoft said the combination would create a more "efficient" company with annual savings of US$1 billion, driven by research and development critical mass, operational efficiencies and increased value for advertisers.

Yahoo has more than 500 million unique users and over 4 billion daily page views.

There are the risks of a "culture mismatch" and potential employee attrition would have to be managed carefully. Microsoft said it would offer significant retention packages to Yahoo engineers, key leaders and employees across all disciplines. The software behemoth expects the deal to get regulatory clearance and to be completed in the second half of 2008.

Comment - About time this happened. As good as Google is, I don't think I want to be in a business world where Google is the highly dominant player, much like what Microsoft was for the last 20 years. The other thing I loved was the professional secrecy in the way the bid was announced - I don't think you will see that in Malaysia with a stock being offered at a 60% premium to closing price. If it was in Malaysia, the stock would have risen close to US$30 prior to the announcement: I wonder why!