Microsoft bids $44.6 billion for Yahoo

[SoulManX]

http://news.yahoo.com/s/ap/20080201/ap_on_hi_te/microsoft_yahoo

 

[bullets]

They are investing in the wrong company.

 

[Ahura Mazda]

That is a hell of a premium. Anybody holding yahoo stock may make back any losses recently incurred. Plus it makes sense for Microsoft who hope to then build it up to compete against Google who currently has an overwhelming market share.

 

[Malice]

Microsoft is still trying to get higher on the search engine usage....

 

[terry78]

Yahoo would definitely flourish under MS. Right now it's just used mostly for mail and that damn answers forum.

 

[jaguarr]

Microsoft is still trying to get higher on the search engine usage....

I think they're more interested in web based services, which is why Google is doing so well at the moment. Mail, word processors and spreadsheets, online image editors, language translation. Google has a ton of tools that are widely used and offers them a chance to advertise specific, targeted results to each and every one of those users. Yahoo has SOME stuff like this, but not a ton. I can see what M$ is trying to do. They're too late into a market that's already taken off without them. It's like the Zune. And they'll probably implement just about as well, too.

Honestly, with the FUBAR known as Vista, M$ should really be trying to figure out how to iron out their core competency issues before trying to assimilate the rest of the known universe. I wonder if the Feds will move to block this at some point, given M$'s legal history.

jag

 

[Ahura Mazda]

I think they're more interested in web based services, which is why Google is doing so well at the moment. Mail, word processors and spreadsheets, online image editors, language translation. Google has a ton of tools that are widely used and offers them a chance to advertise specific, targeted results to each and every one of those users. Yahoo has SOME stuff like this, but not a ton. I can see what M$ is trying to do. They're too late into a market that's already taken off without them. It's like the Zune. And they'll probably implement just about as well, too.

Honestly, with the FUBAR known as Vista, M$ should really be trying to figure out how to iron out their core competency issues before trying to assimilate the rest of the known universe. I wonder if the Feds will move to block this at some point, given M$'s legal history.

jag

I undersatnd what you are saying but don't forget that they have an enormous cash cow with their software business which finances their other ventures. They are already very competent in their core business and by acquiring Yahoo they gain market share and eliminate a serious competitor.

In any case, it will take about 2 years for them to implement such a merger and start attacking google. PLus lets not forget that the barriers of entry are relativel low in this market so google itself stays very vulnerable to someone who creates a better search engine.

 

[jaguarr]

I undersatnd what you are saying but don't forget that they have an enormous cash cow with their software business which finances their other ventures. They are already very competent in their core business and by acquiring Yahoo they gain market share and eliminate a serious competitor.

No, they aren't competent in their core business. Vista was a ginormous flop. They've bled money all over the place from it. They've bled money on Zune. They've bled money on X-Box just trying to get market share. Even the new version of M$ Office has some problems, which is their big cash cow these days. Microsoft has some SERIOUS delivery issues at the moment. Buying a large company with it's own culture, processes and way of doing business like Yahoo will only compound that.

In any case, it will take about 2 years for them to implement such a merger and start attacking google. PLus lets not forget that the barriers of entry are relativel low in this market so google itself stays very vulnerable to someone who creates a better search engine.

I think Google knows search is volatile. That's why they've put so much energy into their specialized ad placement software and all the user tools they currently offer. They are an internet services company, not just a search company, these days. And I'd give M$ at least 3-4 years before they were competitive with Google....who will already be that much further ahead of them by the time they're ready to start playing the game.

jag

 

[terry78]

I didn't think Youtube was worth those billions before it was bought either, but if Gates can do something with Yahoo, we shall see.

 

[The Lizard]

Yahoo video search > Google video search


That might be a reason

 

[Ahura Mazda]

No, they aren't competent in their core business. Vista was a ginormous flop. They've bled money all over the place from it. They've bled money on Zune. They've bled money on X-Box just trying to get market share. Even the new version of M$ Office has some problems, which is their big cash cow these days. Microsoft has some SERIOUS delivery issues at the moment. Buying a large company with it's own culture, processes and way of doing business like Yahoo will only compound that.

The core business is software and the OS and that has an overwhelmingly leading worldwide market share. The rest are business lines which are financed by the forementionned. And you are right on the rest.

I think Google knows search is volatile. That's why they've put so much energy into their specialized ad placement software and all the user tools they currently offer. They are an internet services company, not just a search company, these days. And I'd give M$ at least 3-4 years before they were competitive with Google....who will already be that much further ahead of them by the time they're ready to start playing the game.

jag

And 3-4 years sounds right as it will take them almost 2 years just to effect the merger.

 

[jaguarr]

Oooh... seems investors and shareholders really aren't happy about this, mostly for the reasons I was speculating about before.

jag

 

[jaguarr]

The NY Times has a great article about this entitled A Giant Bid That Shows How Tired The Giant Is.

jag

 

[MODOK]

It's too bad MS doesn't stick to Operating Systems and Office, rather than trying to dominate the whole industry. Maybe then they could put out a decent product.

 

[jaguarr]

This thing's getting interesting. Seems there are a lot of people who don't want to see M$ get their way on this:

http://business.scotsman.com/business/Microsoft-to-face-rivals-in.3738732.jp

Microsoft to face rivals in Yahoo battle

By Nathalie Thomas
GLOBAL giants including Apple and Rupert Murdoch's News Corp are believed to be considering rival bids for the internet company Yahoo, which has received a $44.6bn (£22.6bn) offer from Microsoft.
The conglomerate InterActiveCorp was another company named as a potential bidder for Yahoo, which is said to be unwilling to give in to Microsoft without a fight.

After Microsoft's chief executive Steve Ballmer made the offer in a letter on Thursday, it emerged that Yahoo had rejected a similar takeover attempt by Ballmer's organisation a year before.

Yahoo chief executive and co-founder Jerry Yang is understood not to be Microsoft's greatest fan, and would be prepared to line up another 'white knight' rather than concede to Ballmer.

It is believed he would be particularly open to a rescue bid from Steve Jobs' Apple Corp, having openly expressed his admiration for the firm in the past.

Yang last year invited Jobs to Yahoo's headquarters in Sunnyvale to give a motivational talk to staff.

In a statement on its website, Yahoo said: "Will the board seek proposals from any other companies? The board is going to evaluate all of Yahoo's strategic alternatives and pursue the option that it believes can best maximise value for our shareholders."

David Garrity, analyst at Dinosaur Securities, said a number of China's leading search engine firms may also enter the race. He named Alibaba.com, the Asian search engine which is 40% owned by Yahoo, and Baidu.com, China's market leader.

But Ballmer is unlikely to back down easily. Analysts say Microsoft will readily raise its cash-and-shares offer if another bidder forces its hand.

In a conference call last week, Ballmer showed he meant business when he said: "If we don't get it right at first, we'll just keep coming and coming and coming and coming."

The takeover bid – which if successful will mark the bigge
st internet deal since Time Warner's $182bn (£92.5bn) takeover of AOL at the height of the dotcom boom – is an attempt by Microsoft to gain ground on Google in the global search engine market.

Although Microsoft is still the leading technology company in the world, it is believed its position could soon be threatened if it doesn't turn around its loss-making internet arm and increase its share of the online advertising market.

Recent figures show that Google dominates 66% of the global web search market. Yahoo and Microsoft are leagues behind with just 13% and 4% of the market respectively.

With advertisers expected to double their internet spending by the turn of the decade, analysts say Microsoft cannot afford to fall behind in the search engine wars.

Jonathan Yarmis, analyst at AMR Research, said: "Microsoft has to do this deal. It's a battle that Microsoft needs to win."


The ironic thing is, if M$ is actually successful in this takeover bid, it could be the thing that finally proves to be biting off more than they can chew and takes them (and Yahoo) down the tubes eventually. The merging of an acquisition like that is difficult enough as it is, but if the asset you are acquiring is hostile towards you and will undoubtedly do what they can to sabotage you along the way, it's just going to drag things out and make the whole thing bleed money. Yang hates Microsoft with a passion, so I doubt he'll go down without a fight, anyway, and really not be an asset to M$ at all if they do manage to buy the company away from him.

Like MODOK said above, M$ should stick to what they (used to) do best and just focus on their software business. Their cash cow has plenty of things wrong with it that need attention and stuff like this is just going to detract from that. This wanting to play in all fields in every single emerging market that exists is going to be the end of M$ sooner or later.

jag

 

[The Spawn]

Who doesn't like Monopoly?

 

[jaguarr]

Yahoo's not havin' it:

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0TiN9wwW81A&refer=home

Yahoo to Reject $44.6 Billion Microsoft Bid, WSJ Says (Update3)

By Ari Levy
More Photos/Details

Feb. 9 (Bloomberg) -- Yahoo! Inc., the world's second most popular Internet search engine, plans to reject Microsoft Corp.'s $44.6 billion unsolicited takeover offer, the Wall Street Journal reported, citing a person familiar with the situation.

The board decided the price ``massively undervalues'' the Sunnyvale, California-based company, and Yahoo may face risks because regulators could oppose the combination, the newspaper said today. On Feb. 1, Microsoft offered $31 a share in cash and stock for Yahoo. The company wants at least $40, or more than $12 billion more than Microsoft offered, the Journal said.

Chief Executive Officer Jerry Yang, who said this week that Yahoo is examining its options, may consider a partnership with bigger rival Google Inc. or ways to wrest a higher offer from Microsoft. Yahoo's failure to crack Google's dominance in search led to eight straight profit declines and cut the stock's value in half in the two years before the offer.

``Yahoo still has one of the largest brands on the Internet,'' Bill Tancer, general manager at researcher Hitwise Pty. in San Francisco, said in an interview before the report. ``It confines Google to continue to grow their revenue from a single revenue stream, which is search.''

Yahoo directors, who met over the past week to weigh the offer, will send a letter to Redmond, Washington-based Microsoft on Monday that outlines its position, the Journal said.

``The board is continuing to evaluate the proposal,'' Yahoo spokeswoman Tracy Schmaler said today after the report. ``We're not commenting beyond that.'' Microsoft spokesmen Frank Shaw and Bill Cox didn't immediately return calls.

Higher Bid

Yahoo is betting Microsoft won't take hostile measures to win the bid, the Journal said, even though the software maker has indicated that is a possibility. A person familiar with the matter said this week that Microsoft may seek to oust Yahoo board members should they reject its offer.

``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,'' Microsoft CEO Steven Ballmer said in a letter to Yahoo's board that was made public on Feb. 1.

Yahoo rose 16 cents to $29.20 yesterday in Nasdaq Stock Market trading and Microsoft added 44 cents to $28.56.

The offer is 62 percent more than Yahoo's stock price before the bid. The shares have climbed above the value of the cash-and- stock bid, showing shareholders expect a higher price. Microsoft plans to let investors choose cash or stock, at a ratio that will end up being about 50-50.

$34 to $37

Microsoft shares have declined since the bid, lowering the value of the stock portion and pushing the total value of the deal to about $29.08 a share. Microsoft may have to bid $34 to $37, said UBS AG's Heather Bellini, the top-ranked software analyst by Institutional Investor magazine.

Since the bid is half cash and half stock, Microsoft may fix the offer at $31 before pursuing an increase, so the value doesn't decline with its shares, she said.

Yahoo is getting financial advice from Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Moelis & Co., according to two people familiar with the matter. Spokespeople for Goldman and Lehman declined to comment and a Moelis representative didn't immediately return a phone call.

Morgan Stanley and Blackstone Group LP are counseling Microsoft.

Google Possibility

Yang, 39, has resisted letting go of the company he co- founded in 1995 as a graduate student at Stanford University. Initially a way to help people find their favorite places on the Web, Yahoo became the most-visited U.S. Internet site by combining search, news, sports and finance in a single place.

He replaced Terry Semel as chief in June after Yahoo's share of Web searches tumbled and the company lost sales of banner ads.

Yahoo might seek help from rivals, soliciting other bids or seeking partnerships with Rupert Murdoch's News Corp. or Google to thwart Microsoft, according to analysts including Stanford Group Co.'s Clayton Moran.

The New York Times reported Feb. 4 that Google CEO Eric Schmidt contacted Yang to suggest a partnership between their companies. A partnership with Google may allow Yahoo to outsource its search service, shedding the costs of running its own search engine and sharing ad revenue with its larger rival.

Google spokesman Matt Furman didn't immediately respond to an e-mail today seeking comment.

Regulatory Scrutiny

While a search and advertising partnership with Google is an option, it would face stiff regulatory scrutiny, Moran said. News Corp. isn't interested in bidding for Yahoo, Murdoch said on a Feb. 4 conference call. That means Yang's options probably won't pan out, said Andrew Frank, a New York-based analyst at research firm Gartner Inc.

The U.S. Justice Department is ``interested'' in reviewing the antitrust implications of a Yahoo-Microsoft transaction, agency spokeswoman Gina Talamona said last week. Neelie Kroes, commissioner of competition for the European Commission, said her agency also would scrutinize a deal.

Google has grown faster than Microsoft in every quarter since Google's 2004 initial public offering as its search engine won more users. Even after CEO Steve Ballmer's efforts to build a new search engine from scratch, Google outsold Microsoft in Internet ads by 7-to-1 in Microsoft's latest fiscal year.

Microsoft and Yahoo combined would still fail to seize the lead in Internet search. Google, based in Mountain View, California, got 56 percent of U.S. Web queries in December, which is almost double Yahoo and Microsoft's shares together, according to New York-based Nielsen Online.


jag

 

[Rocker22]

I can't believe they are gonna turn that down.

 

[hippie_hunter]

I can understand Yahoo wanting to remain independent and not wanting to be under the control of Microsoft, but the reason that they have is just plain stupid. Microsoft was very generous with their offer IMO especially how Yahoo's stock has been lately.

 

[jaguarr]

I can't believe they are gonna turn that down.

I dunno. A deal that would bring scrutiny from the justice department over anti-trust implications, probably devalue their stock even further, destroy their corporate culture, see the departure of their board and probably a mass exodus of their engineers, and do nothing to improve their standing in the search engine rankings (and possibly drag them down even further with the problems that come with trying to merge two companies), not to mention it's a hostile takeover attempt by a company the founders and employees of Yahoo have traditionally despised...I can see why they wouldn't want any part of it.

jag

 

[Rocker22]

I dunno. A deal that would bring scrutiny from the justice department over anti-trust implications, probably devalue their stock even further, destroy their corporate culture, see the departure of their board and probably a mass exodus of their engineers, and do nothing to improve their standing in the search engine rankings (and possibly drag them down even further with the problems that come with trying to merge two companies), not to mention it's a hostile takeover attempt by a company the founders and employees of Yahoo have traditionally despised...I can see why they wouldn't want any part of it.

jag

I think I just got served. Touché!

 

[terry78]

That would be like Youtube, a company based on being independent and not kowtowing to the man, selling out to a larger company. Wait....

 

[jaguarr]

I think I just got served. Touché!

Wasn't trying to "serve" you. Just stating the reasons I've seen floating about as to why Yahoo is trying to prevent this deal from going forward.

jag

 

[GoldenAgeHero]

Im glad yahoo isn't taking thier bid. MS are greedy bastards.

yo jag where can i find gooogle's office tools?

 

[jaguarr]

docs.google.com

jag