Microsoft Launches Take-over Bid of Yahoo

6 February 2008

By Jane Coyle

Microsoft has launched a $44.6bn (£22.4bn) bid for internet rival Yahoo in a deal to rival market leader Google. Microsoft, which came late to the internet advertising market, is offering Yahoo shareholders $31 a share in a combination of cash and its own stock. The deal would rank as one of the largest dotcom takeovers since AOL and Time Warner merged at the height of the tech stock boom. There has been speculation about the two companies getting together with Yahoo declining an offer from Microsoft just last year. Microsoft's chief executive, Steve Ballmer, said today that he called his counterpart at Yahoo, Jerry Yang, on Thursday night before going public with the offer. In a statement, Yahoo said it "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's position has certainly weakened over the past year as repeated delays to the roll-out of its new advertising platform Panama have sent its shares into freefall. Earlier this week Yahoo shares fell to a four-year low as plans to axe 1,000 jobs following a 24% drop in fourth-quarter profits to $205m. But while Yahoo has suffered, Google has powered ahead in the online search market, which it dominates with a global share estimated at 75% . Microsoft reckons the global online advertising market will grow from over $40bn last year to nearly $80bn by 2010 Microsoft believes that putting together Yahoo's search and online advertising technology with its own onto one central platform will create a much more powerful competitor to Google. If any deal is agreed it is likely to be heavily scrutinised by regulators on both sides of the Atlantic. As well as their positions in the online search market both companies are major players in the wider online advertising market and have recently made moves to buy ad-serving companies, which place adverts on websites and are seen as playing a crucial role in the future development of online advertising.

Jane Coyle is a Trainee Solicitor with Lawdit Solicitors.