updated 07:25 am EST, Fri February 1, 2008
Microsoft Offers Yahoo Buy
Microsoft on Friday startled the industry by offering to buy Yahoo, potentially creating a major shift in online business. The proposal would see Microsoft pay $31 per share in a deal worth a total of $44.6 billion. This is 62 percent higher than Yahoo's closing stock price on Thursday, Microsoft observes. The latter argues that an acquisition would help both companies compete in web services and that about $1 billion per year could be saved between the two by eliminating overhead.
"We have great respect for Yahoo," says Microsoft chief Steve Ballmer. "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."
Yahoo has yet to comment on the offer, which had previously been rumored and is widely believed to have been made out of worries that Google will continue to control both web advertising as well as an increasing shift to web applications, such as Google's Docs and Spreadsheets tools. Microsoft reacted to Google's buyout of DoubleClick by purchasing lesser-known ad firm aQuantive and has otherwise shadowed Google moves in recent months.
A completed acquisition would create a potential upheaval for many of Yahoo's partners, some of which are frequently considered rivals to Microsoft. Apple uses Yahoo's search, stocks, and weather services for the iPhone and iPod touch, while Yahoo itself offers its online music services for SanDisk's Sansa Connect wireless music player, which competes directly with the Zune.
Yahoo, however, has been struggling to achieve profitability in recent months and in recent days just slashed 1,000 jobs in an attempt to reorganize around its core search business.