Microsoft Offers Yahoo $44.6 Billion Buyout

Microsoft has made a bid, at a huge premium, to purchase Yahoo!

Microsoft Offers Yahoo $44.6 Billion Microsoft has offered to buy the search engine company Yahoo for $44.6bn (£22.4bn) in cash and shares. The offer, contained in a letter to Yahoo’s board, is 62% above Yahoo’s closing share price on Thursday.

Yahoo cut its revenue forecasts earlier this week and said it would have to spend an additional $300m this year trying to revive the company. It has been struggling in recent years to compete with Google, which has also been a competitor to Microsoft.

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“Ultimately this corporate marriage was forced by the rise of Google, which has grown into a serious competitor for both Microsoft as a software company and Yahoo as an internet portal,” said Tim Weber, business editor of the BBC News website. “It is a shotgun marriage, but the person holding the shotgun is Google.”

According to its letter to Yahoo, Microsoft attempted to enter talks about a deal a year ago, but was rebuffed because Yahoo was confident about the “potential upside” presented by the reorganisation and operational activities that were being put in place at the time. “A year has gone by, and the competitive situation has not improved,” Microsoft’s letter said.

But there has been some concern about the price that Microsoft is offering. “To me, the premium seems exorbitant, for what is a dwindling business,” said Tim Smalls from the brokerage firm Execution LLC. “I personally don’t see how the synergies of Microsoft-Yahoo is going to take on Google.”

I don’t either, at this stage. Then again, I can’t think of a better pairing to make a go at Google.

One does wonder, though, why bidding would start at 162% of the stock price.

FILED UNDER: Economics and Business, Science & Technology,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Bithead says:

    They might not corner the search engine market, but they WOULD have a working monopoly on IM.

  2. […] Joyner over at OTB notes that Microsoft has submitted an offer to buy Yahoo for […]

  3. Michael says:

    they WOULD have a working monopoly on IM.

    AOL is still the IM giant, and Google is one of the big 4 also. Recent news about AOL offering an XMPP server for AIM leaves an opening to allow AIM and GTalk users to chat directly with each other, which would be a boost to both companies. If that happens, you’ll see a host of other portals offering their own IM service (myspace, facebook, Apple’s .Mac), which will let you connect to AIM and GTalk users as well. If Microsoft/Yahoo doesn’t participate, the’ll be the also-rans in the IM market as well as search.

    I’m not even sure if anybody uses Yahoo IM anymore anyway.

  4. Bithead says:

    Actually, I’ve used it for years. I tend to prefer the chatter to MS’s thing.

    I have an email address there as well… mostly based on antiquity, more than anything else, but it works very nicely. And FWIW, they’ve been running a portal to MS chat for over a year, now.

    As for AIM, with the whole AOL network basically in the septic tank, I have my doubts I doubt that’s going to be a factor, much longer.

  5. Michael says:

    Well none of them will matter too much in the future, once distributed XMPP takes off, every ISP will run their own IM server just like they run their own email server, and your email address will also be your screen name, and you can chat with people on other networks based on their screen name.

    FWIW, I use Pidgin for all my IM connections, AIM, GTalk, Yahoo and MSN (these 2 don’t really get used anymore), and also Lotus Sametime while at work. Best IM client there is in my opinion, and you can’t beat the price.