Microsoft Offers $44.6B for Yahoo

[Denny Crane]

http://biz.yahoo.com/ap/080201/microsoft_yahoo.html?.v=14

Microsoft Offers $44.6B for Yahoo

Friday February 1, 8:23 am ET
By Michael Liedtke, AP Business Writer

Microsoft Makes Unexpected $44.6B Offer for Internet Icon Yahoo SAN FRANCISCO (AP) -- Microsoft Corp. has pounced on slumping Internet icon Yahoo Inc. with an unsolicited takeover offer of $44.6 billion in its boldest bid yet to challenge Google Inc.'s dominance of the lucrative online search and advertising markets.The surprise offer of $31 per share, made late Thursday and announced Friday, comes with Sunnyvale-based Yahoo in a vulnerable position.

With its profits steadily sliding, Yahoo's stock slipped to a four-year low earlier this week and a new management team has been trying to steer a turnaround but sees more turbulence through 2008.

The announcement sent Yahoo's share price up 60 percent in premarket trading, while Google fell 8 percent.

In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer indicated the world's largest software maker is determined to bring the two companies together.

To underscore its resolve, Microsoft is offer a 62 percent premium to Yahoo's closing stock price Thursday.

Since reaching a 52-week high of $34.08 in October, Yahoo shares have fallen 46 percent. Yahoo climbed $11.47 a share, or 59.8 percent, to $30.65 in premarket trading. Microsoft shares fell $1.95, or 6 percent, to $30.65.

Ballmer revealed in the letter that Yahoo had rebuffed a previous overture a year ago, saying it had a turnaround in the works. But he pointedly noted Yahoo has instead deteriorated significantly.

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

Microsoft's previous offer was rebuffed by Terry Semel, who stepped aside last year as chief executive under shareholder pressure.

Microsoft sent its latest takeover offer to Yahoo late Thursday, shortly after Semel resigned as the company's chairman. The letter is addressed to Semel's successors, new Chairman Roy Bostock and the current CEO, co-founder Jerry Yang, who is one of Yahoo's largest shareholders.

"Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers," Ballmer wrote.

Yahoo didn't immediately respond for requests for comment.

Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent cash and 50 percent stock.

Microsoft said it sees at least $1 billion in cost savings generated by the combination, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.

Signaling Microsoft doesn't intend to take no for an answer, Ballmer wrote that the company "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal."

Google shares fell $46.55, or 8.3 percent, to $517.95 in premarket trading after the Mountain View-based company reported fourth-quarter earnings that missed analyst estimates.

While Yahoo is struggling, Microsoft is thriving. The Redmond, Wash.-based company last week forecast a rosy 2008 -- despite broader economic worries -- after it blew by Wall Street's expectations for a second consecutive quarter.

 

[Denny Crane]

Google's been doing to Microsoft what Microsoft did to IBM. That is, they are taking on the giant and becoming the giant. This is Microsoft's move to stay on top.

My sense is that Yahoo! has blown its chance to be the dominant Internet company, and it's been grasping at straws while Google has surpassed them in every way. Google's more than just a threat to Yahoo!, it's been venturing into Microsoft's turf to the point where there's no doubt they could put a real hurt on them.

At some point, I expect Google to be selling cheap PCs with a network-centric focus, basically designed to take advantage of Google's WWW site and WWW application offerings (GMail, for example).

http://chart.finance.yahoo.com/c/1y/y/yhoo

 

[MikeDC]

I agree that Yahoo blew it's chance. What's generally mystifying to me is why Microsoft is spending that kind of cash on a company that's obviously blown its chance. Doesn't look all that smart to me.

Not that a lot of the stuff that Microsoft does seems smart to me, but still. I look at this and don't see any obvious benefit for Microsoft.

 

[Shapecity]

<div class='quotetop'>QUOTE (MikeDC @ Feb 1 2008, 11:27 AM) <{POST_SNAPBACK}></div><div class='quotemain'>I agree that Yahoo blew it's chance. What's generally mystifying to me is why Microsoft is spending that kind of cash on a company that's obviously blown its chance. Doesn't look all that smart to me.

Not that a lot of the stuff that Microsoft does seems smart to me, but still. I look at this and don't see any obvious benefit for Microsoft.</div>

My initial reaction as well. I do enjoy using both Yahoo & Google and I hope Yahoo doesn't agree to this deal.

 

[cpawfan]

<div class='quotetop'>QUOTE (MikeDC @ Feb 1 2008, 11:27 AM) <{POST_SNAPBACK}></div><div class='quotemain'>I agree that Yahoo blew it's chance. What's generally mystifying to me is why Microsoft is spending that kind of cash on a company that's obviously blown its chance. Doesn't look all that smart to me.

Not that a lot of the stuff that Microsoft does seems smart to me, but still. I look at this and don't see any obvious benefit for Microsoft.</div>

Credibility and reputation. m$ needs both to battle google in the consumer space.

 

[MikeDC]

<div class='quotetop'>QUOTE (cpawfan @ Feb 1 2008, 01:38 PM) <{POST_SNAPBACK}></div><div class='quotemain'><div class='quotetop'>QUOTE (MikeDC @ Feb 1 2008, 11:27 AM) <{POST_SNAPBACK}></div><div class='quotemain'>I agree that Yahoo blew it's chance. What's generally mystifying to me is why Microsoft is spending that kind of cash on a company that's obviously blown its chance. Doesn't look all that smart to me.

Not that a lot of the stuff that Microsoft does seems smart to me, but still. I look at this and don't see any obvious benefit for Microsoft.</div>

Credibility and reputation. m$ needs both to battle google in the consumer space.
</div>

Meh. People ain't dumb. They know a turd when they see it.