Guest Levy Posted February 2, 2008 Share Posted February 2, 2008 As many of you know, Yahoo has been slowly losing popularity. Now now Microsoft wants it. In my Saturday paper, Microsoft has a $44.6 billion bid! Which works to about $31 per share of Yahoo's stock. This merger could provide an imediate competitor with Google, it is no longer a 3 way fight. If Yahoo accepts the merger, Google will be fighting 2-1. International Herald Tribune In a bold move to counter Google's online pre-eminence, Microsoft said Friday that it had made an unsolicited offer to buy Yahoo for about $44.6 billion in a mix of cash and stock. If consummated, the deal would redraw the competitive landscape in Internet consumer services, where both Microsoft and Yahoo have both struggled to compete with Google. The offer of $31 a share represents a 62 percent premium over Yahoo's closing stock price of $19.18 on Thursday. It would be Microsoft's largest acquisition ever. Microsoft said the combination of the two companies would create efficiencies that would save approximately $1 billion annually. The software giant also said that it has an integration plan to include employees of both companies and intends to offer incentives to retain Yahoo employees. Steven Ballmer, the Microsoft chief executive, said that he called his Yahoo counterpart, Jerry Yang, on Thursday night to tell him that Microsoft intended to bid on the company, and that they had a substantive discussion. "I wouldn't call it a courtesy call," he said in an interview. Ballmer said he had decided to pursue a takeover because friendly deal negotiations would most likely be protracted and would probably become public. "These things are hard to keep quiet in the best of times," he said. He said his conversation with Yang was constructive, but suggested that a deal may not come easily. Yahoo said in a news release Friday that its board would evaluate Microsoft's bid "carefully and promptly in the context of Yahoo's strategic plans." In a letter to Yahoo's board, Ballmer wrote that the two companies discussed a possible merger, as well as other ways to work together, in late 2006 and 2007. Ballmer said that in February 2007, Yahoo decided to end the merger discussions because its board was confident in the company's "potential upside." "A year has gone by, and the competitive situation has not improved," Ballmer wrote. As a result, he said, "while a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing." Ballmer met several times in late 2006 and 2007 with Terry Semel, then Yahoo's chief executive, people involved in the talks said. While the talks — originally focused on the prospect of a merger or a joint venture — were initially constructive and appeared to move forward, they quickly broke down, these people said. After a series of secret meetings between both sides in hotels around California and elsewhere, Semel and Yahoo's board decided against progressing with the talks, betting that its stock would turn around as it introduced a new advertising system called Panama, these people said. Yang, in particular, was adamantly against selling the company to Microsoft and championed the view of remaining independent, they added. Ballmer constantly consulted with Bill Gates, the Microsoft chairman, about the progress of the negotiations, people close to the company said, and when the talks collapsed, he decided to wait to see the fate of Yahoo's stock price. As the stock continued to fall, they said, Microsoft's management became emboldened and began internal meeting in late 2007 about the prospect of making a hostile bid. Despite their heavy investments in online services, both Yahoo and Microsoft have watched Google extend its dominance over Internet search and the lucrative online advertising business that goes along with it. In recent months, Yahoo has struggled to develop a plan to turn around the company under Yang, its co-founder, who was appointed chief executive amid growing shareholder dissatisfaction last June. Yahoo investors, however, remain skeptical. The company's shares have slumped, and the closing price on Thursday was 44 percent below its 52-week high. In midday trading Friday, Yahoo's shares were up 45 percent, to about $28. Microsoft's shares were down about 7 percent, and Google's shares declined about 9 percent. Microsoft, like Yahoo, has faced an uphill battle against Google. The company invested heavily to build its own search engine and advertising technology. Last year, it spent $6 billion to acquire the online advertising specialist aQuantive. Microsoft's online services unit has been growing, but remains unprofitable. Meanwhile, Google's share of the search market and of the overall online advertising business has continued to grow. Announcing its quarterly earnings earlier this week, Yahoo said it would cut 1,000 jobs in an effort to refocus the company and reduce spending, and issued an outlook for 2008 that disappointed investors. CNet News In its response, Yahoo called the Microsoft bid "unsolicited" but did not reject it. Microsoft's offer, which was contained in the letter to Yahoo's board, amounts to $31 a share and represents a 62 percent premium over Yahoo's closing price on Thursday. Microsoft said it will offer shareholders the option of cash or stock. "We have great respect for Yahoo, and together, we can offer an increasingly exciting set of solutions for consumers, publishers, and advertisers while becoming better positioned to compete in the online-services market," Microsoft CEO Steve Ballmer said in a statement. Yahoo said in a responding statement that its board "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." The deal comes as Microsoft and Yahoo have both struggled to compete against Google. Microsoft didn't mention Google by name in its announcement, but it did indicate that its acquisition bid was aimed squarely at its rival. "Today, the market is increasingly dominated by one player, who is consolidating its dominance through acquisition," Microsoft said. "Together, Microsoft and Yahoo can offer a credible alternative." In a conference call Friday morning, Ballmer said that Microsoft and Yahoo "really do share a vision for the potential of online services." Microsoft said in its statement that it believes that it can get all of the needed regulatory approvals and that the deal, if ultimately approved by Yahoo shareholders, could be completed in the second half of the year. Michael Gartenberg, an analyst at Jupiter Research, said it's "clear that there is increased pressure on Microsoft from Google, and they recognize that. Way back when, Yahoo wasn't that interested in a Microsoft deal. What a difference two years make. Microsoft has a pile of money, and Yahoo has experienced problems of its own. Ballmer, in the past, has historically not loved these types of deals. It is indicative of how different the world is now." Gartenberg added that the deal "absolutely" makes sense. "But there is a lot to be done in the details. Getting this deal done might be the easiest part. The real challenge is what happens when they finish the deal. This is not a panacea--the details will be what matters," he said. Rumors that Microsoft was interested in Yahoo have bubbled up from time to time, including the past two springs, on the eve of Microsoft advertising conferences. The move would be by far the largest acquisition ever for Microsoft. Its largest prior deal, also in the online-advertising space, was last year's $6 billion deal to acquire Aquantive. Asked on the conference call why Microsoft still needs Yahoo after buying Aquantive, Ballmer pointed to Yahoo's reach with consumers. "Certainly from a consumer perspective, there's no better way to increase scale and capacity than this acquisition," Ballmer said. Microsoft also pointed to the intense investments needed in data centers and technology needed to compete with Google. "Scale matters," said Kevin Johnson, president of the Microsoft division that houses Windows and online advertising. "Some of the scale economics can kick in rather rapidly." Ultimately, Ballmer said, the deal should help Microsoft become profitable in online advertising. "We've been losing money," Ballmer said. "Our plan would be to not lose money in the future." In a letter sent to Yahoo's board late Thursday, Microsoft confirmed that it has had talks with Yahoo since 2006 but that its suggestions of an acquisition had been rebuffed. "In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together," Microsoft said. "These discussions were based on a vision that the online businesses of Microsoft and Yahoo should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected." The letter goes on to say that an offer in February 2007 was also rejected. Although at one time, Microsoft was open to other kinds of partnerships with Yahoo, the company says now it just wants to own Yahoo outright. "While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing," Microsoft said in the letter. In the conference call, Ballmer said that when Microsoft first talked to Yahoo more than a year ago, it believed that a merger would have benefits to both companies. "We believe now in those benefits more than ever," Ballmer said. The public offer follows Yahoo's disappointing earnings report on Tuesday, which sent the company's shares down. Yahoo CEO Jerry Yang said Tuesday that the company is facing "headwinds." He also announced 1,000 layoffs. Terry Semel, Yahoo's former CEO, who left that position last summer but remained as nonexecutive chairman of the board, left the company altogether on Thursday. Microsoft's move validates Yahoo's value and could bring out other prospective buyers, said Danny Sullivan, editor of Search Engine Land. However, Microsoft doesn't have enough of a plan as to how it would integrate Yahoo into the company, he said. Unlike with Microsoft's Aquantive and Tellme acquisitions, Microsoft and its Live brands have a lot of overlap with Yahoo, including e-mail, portal, advertising, and search. "Microsoft suffers in that they are conflicted over two different brands, and now they're going to have to be conflicted over three," Sullivan said. "If Microsoft wants to be a leader in search, this is a way for them to climb up and be No. 2 against Google. And it validates that Yahoo isn't a loser. It's a company that's worth a lot of money." A merger might give Google some extra competition, but it wouldn't unseat it as the top search provider, and it would take some time to convince advertisers that they would do better on a Microsoft-Yahoo platform over Google's highly successful ad business, said Mark Mahaney of Citigroup. "If Yahoo wants to remain independent, it will need to show investors that it is willing to take radical, value-creating steps," and outsourcing search to Google is one of its few options, Mahaney wrote in a research note. Imran Khan of J.P. Morgan Securities thinks that regulators will approve the deal. "Yahoo is better off inside a larger company with (a) strong balance sheet and technology," Khan wrote in a research note. A merger of Microsoft and Yahoo could give them the scale, in terms of search traffic, that they need to compete against Google and provide a boost on the ad side, he added. "A combination of Yahoo's relationships (with DSL providers), and Microsoft's applications and devices, could create a very well positioned potential competitor," Khan wrote. Microsoft's financial advisers are Morgan Stanley and The Blackstone Group. New York Times In a bold move to counter Google’s online pre-eminence, Microsoft said Friday that it had made an unsolicited offer to buy Yahoo for about $44.6 billion in a mix of cash and stock. If consummated, the deal would redraw the competitive landscape in Internet consumer services, where both Microsoft and Yahoo have both struggled to compete with Google. The offer of $31 a share represents a 62 percent premium over Yahoo’s closing stock price of $19.18 on Thursday. It would be Microsoft’s largest acquisition ever. Microsoft said the combination of the two companies would create efficiencies that would save approximately $1 billion annually. The software giant also said that it had an integration plan to include employees of both companies and intends to offer incentives to retain Yahoo employees. Steven A. Ballmer, the Microsoft chief executive, said that he called his Yahoo counterpart, Jerry Yang, on Thursday night to tell him that Microsoft intended to bid on the company, and that they had a substantive discussion. “I wouldn’t call it a courtesy call,†he said in an interview. Mr. Ballmer said he had decided to pursue a takeover because friendly deal negotiations would most likely be protracted and would probably become public. “These things are hard to keep quiet in the best of times,†he said. He said his conversation with Mr. Yang was constructive, but suggested that a deal may not come easily. Yahoo said in a news release Friday that its board would evaluate Microsoft’s bid “carefully and promptly in the context of Yahoo’s strategic plans.†In a letter to Yahoo’s board, Mr. Ballmer wrote that the two companies discussed a possible merger, as well as other ways to work together, in late 2006 and 2007. Mr. Ballmer said that in February 2007, Yahoo decided to end the merger discussions because its board was confident in the company’s “potential upside.†“A year has gone by, and the competitive situation has not improved,†Mr. Ballmer wrote. As a result, he said, “while a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing.†Mr. Ballmer met several times in late 2006 and 2007 with Terry S. Semel, then Yahoo’s chief executive, people involved in the talks said. While the talks — originally focused on the prospect of a merger or a joint venture — were initially constructive and appeared to move forward, they quickly broke down, these people said. After a series of secret meetings between both sides in hotels around California and elsewhere, Mr. Semel and Yahoo’s board decided against progressing with the talks, betting that its stock would turn around as it introduced a new advertising system called Panama, these people said. Mr. Yang, in particular, was adamantly against selling the company to Microsoft and championed the view of remaining independent, they added. Mr. Ballmer constantly consulted with Bill Gates, the Microsoft chairman, about the progress of the negotiations, people close to the company said, and when the talks collapsed, he decided to wait to see the fate of Yahoo’s stock price. As the stock continued to fall, they said, Microsoft’s management became emboldened and began internal meeting in late 2007 about the prospect of making a hostile bid. Despite their heavy investments in online services, both Yahoo and Microsoft have watched Google extend its dominance over Internet search and the lucrative online advertising business that goes along with it. “No one can compete with Google on their own any more,†said Jon Miller, the former chairman and chief executive of AOL. “There has to be consolidation among the major players. It has been a long time coming, and now it is here.†In recent months, Yahoo has struggled to develop a plan to turn around the company under Mr. Yang, its co-founder, who was appointed chief executive amid growing shareholder dissatisfaction last June. Yahoo investors, however, remain skeptical. The company’s shares have slumped, and the closing price on Thursday was 44 percent below its 52-week high. Yahoo’s shares closed Friday up 48 percent, to $28.38. Microsoft’s shares were down nearly 7 percent, and Google’s shares declined nearly 9 percent. Microsoft, like Yahoo, has faced an uphill battle against Google. The company invested heavily to build its own search engine and advertising technology. Last year, it spent $6 billion to acquire the online advertising specialist aQuantive. Microsoft’s online services unit has been growing, but remains unprofitable. Meanwhile, Google’s share of the search market and of the overall online advertising business has continued to grow. Announcing its quarterly earnings earlier this week, Yahoo said it would cut 1,000 jobs in an effort to refocus the company and reduce spending, and issued an outlook for 2008 that disappointed investors. The timing of Microsoft’s bid could allow the company to mount a proxy contest for control of Yahoo’s board should it try to dismiss the offer. Microsoft has discussed the prospect of mounting such a campaign, people close to the company said, and has until March 13 to propose a slate. In his letter to Yahoo’s board, Mr. Ballmer wrote, “Depending on the nature of your response, Microsoft 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.†On Thursday night, Yahoo announced that Mr. Semel, its nonexecutive chairman and former chief executive, was leaving the board. Under Mr. Semel, a long-time Hollywood studio executive who ran Yahoo from 2001 to 2007, the company became more focused on its advertising and media businesses, but was unable to keep up with Google’s challenge in Web search and advertising and with the rise of social networking sites such as MySpace and Facebook. A longtime board member, Roy J. Bostock, has been named nonexecutive chairman, Yahoo said. Microsoft said it believes the Yahoo transaction could receive the necessary regulatory approvals in time to close by the second half of this year. Quote Link to comment Share on other sites More sharing options...
Fable Posted February 3, 2008 Share Posted February 3, 2008 Haha Microsoft is taking over the internet world now. I have to admit the only reason I get on yahoo is to go on the movies page. I don't even use my account on there anymore. But nevertheless I think Google could stand strong against Yahoo and Microsoft. :laughingsmiley: Quote Link to comment Share on other sites More sharing options...
Guest Levy Posted February 3, 2008 Share Posted February 3, 2008 Whatever happens, it shouldn't effect me... I hope. Quote Link to comment Share on other sites More sharing options...
antiaircraft Posted February 4, 2008 Share Posted February 4, 2008 If anything, this should actually benefit consumers like us, since Google and Microsoft will both be trying to outdo each other. But in my opinion, Google will still win. :yes: Quote Link to comment Share on other sites More sharing options...
Crusher Posted February 15, 2008 Share Posted February 15, 2008 Don't forget that Yahoo! owns Flickr. Microsoft wants that, I'm sure. =Cameron= Quote Link to comment Share on other sites More sharing options...
antiaircraft Posted February 15, 2008 Share Posted February 15, 2008 Well it seems that Microsoft is now going to acquire Yahoo! no matter what... there have been management shifts making room to effectively 'digest' Yahoo! Quote Link to comment Share on other sites More sharing options...
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