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Microsoft offers to buy Yahoo--again

In the world of Internet search there are three main players: Microsoft, Yahoo and Google. While Google excels, the other two members of the big three are seeing their market share drop and Yahoo is having serious financial woes.

According to MSNBC, Microsoft sees this as the perfect chance to buy the floundering Yahoo property and gain some ground on the 600-pound search gorilla Google. Microsoft made an offer to purchase Yahoo for $44.6 billion and according to some the purchase could be a boon for the entire technology market. The Microsoft offer raised Yahoo stock prices by 54%.

The Microsoft offer places a 62% premium on the Yahoo stock closing price from Tuesday and the 52 week high for Yahoo stock was $34.08 in October. MSNBC reports that Microsoft offered to buy Yahoo last year and CEO Ballmer sent a letter to the Yahoo board. The Yahoo board at the time declined the offer. Ballmer told MSNBC, “According to that letter, the principal reason for this view was the Yahoo board's confidence in the "potential upside" if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment.”

According to sources, shareholders of Yahoo could choose cash or stock in the form of Microsoft common shares. The total purchase of Yahoo would be made with 50% cash and 50% stock. Microsoft is reported to expect a $1 billion cost savings from the merger and says it will offer significant retention packages to key Yahoo employees, engineers and managers.

Yahoo is in the process of restructuring its online business and announced earlier this month that it would be making big changes to gain market share. Part of the big changes Yahoo made was to cut jobs in an effort to cut expenses.

DailyTech reported that rumors were circulating that Yahoo could potentially lay off as many as 2,000 workers -- a figure an insider denied saying the actual number of jobs likely to be lost was more in the hundreds. A few days after the company insider said job cuts in the hundreds, Yahoo cut 1,000 jobs and announced its profits had fell by 23%.



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Merge
By Master Kenobi (blog) on 2/1/2008 10:11:13 AM , Rating: 4
Combined, Microsoft and Yahoo would have almost as much Market share as Google. I'm sure Microsoft could find a way to make it work. Microsoft's "Live Search" is fairly good.




RE: Merge
By Homerboy on 2/1/2008 10:15:44 AM , Rating: 5
what "market share" are you speaking of? Please don't think of Yahoo as just a search engine...


RE: Merge
By GreenyMP on 2/1/2008 12:07:50 PM , Rating: 2
Why not. That is what it is. Just like Google. Yea they have many other useful internet applications, but everything they offer is an attempt to get you to use their search. Because that is where they make their money.

In my personal opinion, the place where they fail is the banners and advertising. They should take a page from Google's book and trim the over-the-top advertising. Then more people would use their products/internet applications and consequently more people would use their search. Then they would make more money.


RE: Merge
By wordsworm on 2/1/2008 12:20:49 PM , Rating: 2
I still think of Yahoo as a better service provider than Google or Microsoft on the Internet. I don't use their search engine - with the exception of financial information about other companies, but I think their messenger service is the best. Their email client could be a bit easier to use, but overall I think it's much nicer than Google's spartan approach. I barely think of Google beyond its search engine. I use its email function as well, but I must say I don't like the interface as much.

Also, Google is relatively unknown in many parts of Asia, while everyone knows Yahoo. So, while I think the purchase will come to pass, I will still miss them.


RE: Merge
By murphyslabrat on 2/1/2008 12:40:55 PM , Rating: 2
quote:
but overall I think it's much nicer than Google's spartan approach.

Ironic, as that is precisely what I love about Gmail, the simplicity of the interface. However, I find it to be much more functional than either Yahoo! Mail or Hotmail.

As an aside, am I the only person who thinks that Steve Balmer looks like the Soldier from Team Fortress 2?


RE: Merge
By qwertyz on 2/1/08, Rating: -1
RE: Merge
By TomZ on 2/1/2008 3:07:38 PM , Rating: 1
Only problem with your idea is that Google would have cost Microsoft probably $200B.

Considering the size of the online advertising, and its growth rate, the price Microsoft is paying for Yahoo is pretty reasonable. It sounds like a lot of money to you and to me, but when you compare it to the value of other businesses in that market (e.g., Google), it's probably a good investment, assuming the acquisition gets executed well.


RE: Merge
By rudy on 2/2/2008 2:18:15 AM , Rating: 1
I sort of agree but for other reasons. look at all the recent mergers and aquisitions that have not gone over well. ATI/nVidia, Sprint/Nextel benz/chrystler. Also what the heck does M$ gain from this? They already have nearly all of the same services yahoo offers. If they know there is trouble start hiring the good people out of yahoo and build what you want. Don't spend 44 billion and become a company in debt. If you do that how are you going to have money to fund some of the other markets they are going into. If there is something missing from your services spend a fraction of that to develop it or improve it. I think acquiring new companies to add to your company is good, but acquiring one that does the same thing is just to expensive for to little gain.


RE: Merge
By wordsworm on 2/2/2008 7:13:34 AM , Rating: 2
Yahoo has the world's most popular website. Google is number 2. Yahoo is a much better value for MS than Google. They are far more than just a search entity. They're entertainment, email, they've got a great messenger service. As it stands, I'm more worried that MS is going to wreck the world's most popular website.


RE: Merge
By jadeskye on 2/1/2008 3:32:17 PM , Rating: 2
quote:
As an aside, am I the only person who thinks that Steve Balmer looks like the Soldier from Team Fortress 2?


HAHA!! you're so RIGHT!

man i'm sigging that...


RE: Merge
By Samus on 2/1/2008 8:11:05 PM , Rating: 2
Yahoo has valuable contracts, specifically with SBC (their DSL 'front-end') and their news and financial service.


RE: Merge
By stburke on 2/1/2008 10:29:41 AM , Rating: 2
I like the idea of a Microsoft! More than likely this is just the start, I wouldn't be surprised to see them hit ~70% premium per share. MS will make this happen, the fed better let this one go.


RE: Merge
By jtesoro on 2/1/2008 10:47:16 AM , Rating: 2
Anyone has an idea what's behind the comment that "the purchase could be a boon for the entire technology market"?


RE: Merge
By JustTom on 2/1/2008 11:22:10 AM , Rating: 4
Lazy reporting? I really don't know, however the whole 'some say' journalistic gambit is like fingers on a blackboard to me. It is a way to introduce something, give it an imprimatur without the need to provide either sources or the reasoning behind the statement. This is really prevalent in political reporting where it allows an interviewer to ask the most outrageous questions as long as he prefaces it with 'some say'.


RE: Merge
By Ringold on 2/1/2008 11:32:43 AM , Rating: 2
They're refering to share prices being boosted in the sector; they've been under a lot of pressure since Christmas or so. By that I mean the high-fliers of last year, RIMM, EMC, semiconductor stocks, etc. It's not actually refering to the "technology" industry at all -- just the stocks.

Since the Nasdaq is down 2 points right now I'm not sure how well that thesis works though. I just wish I'd sold my Google when it was north of 700, darn it. :P


RE: Merge
By Scware on 2/1/2008 11:29:21 AM , Rating: 2
Maybe the fact that Microsoft has already bought out enough companies. 3 major search engine companies are better than it just being Google vs. Microsoft.


RE: Merge
By Ringold on 2/1/2008 11:33:28 AM , Rating: 2
Amazons A9 is offended that you forgot about it. :)


RE: Merge
By MrPieGuy on 2/1/2008 11:40:04 AM , Rating: 5
And Microsoft is sad you forgot A9 is powered by Windows Live :)


RE: Merge
By Ringold on 2/1/2008 1:23:31 PM , Rating: 2
Touche!


RE: Merge
By Spivonious on 2/1/2008 1:49:53 PM , Rating: 2
Altavista, Lycos, Dogpile, Webcrawler, Ask.com, Excite...

Those are just ones off the top of my head.


RE: Merge
By FITCamaro on 2/1/2008 10:32:46 AM , Rating: 2
While I wouldn't mind the merger, I see the EU b*tching about this as well.


RE: Merge
By Griswold on 2/1/2008 11:46:41 AM , Rating: 1
When the distant third wants to buy the relatively distant second (as far as online advertising goes) and considering that this is not the core business of MS - which is software and that is why they have been under the microscope for so many years -, it is unlikely that any anti-trust laws will be violated or regulations should take place, whatsoever. It will be looked into, of course.

But it was clear that you would try to land a cheap shot despite your lack of understanding.


RE: Merge
By Eris23007 on 2/1/2008 2:31:52 PM , Rating: 4
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2...

quote:
Clayton Moran, an analyst with Stanford Group Co., said Microsoft should be prepared to pay even more to purchase Yahoo because it's the only way for Microsoft to reach its stated goal of owning 30 percent of the online search market.

"Microsoft also aims to be one of the top two Internet advertising companies," Moran wrote. "In our view, an acquisition of Yahoo appears to be the only way to achieve these goals."

Moran said an anti-trust review by the Department of Justice could run through the end of the year. He said Stanford Group is particularly concerned about European approval, given that the EU continues to delay the closing of Google's acquisition of online advertiser DoubleClick.


You might want to ACTUALLY READ SOME ARTICLES and GAIN SOME UNDERSTANDING YOURSELF before you accuse others of trying "to land a cheap shot despite [their] lack of understanding."


RE: Merge
By TomZ on 2/1/2008 3:20:37 PM , Rating: 1
quote:
considering that this is not the core business of MS - which is software

I agree with your conclusion - that anti-trust regulators probably won't any serious concerns about this acquisition - the fact is that Microsoft does actually have a pretty sizable market share already in online search and advertising. So in fact there is quite a bit of overlap of Microsoft's existing businesses.

But considering that the combination of Microsoft and Yahoo will still have less than half the share that Google has, regulators would be on shaky ground trying to oppose the acquisition.


RE: Merge
By napalmjack on 2/1/2008 3:24:35 PM , Rating: 2
How exactly is that a cheap shot?

BTW, a cheap shot would probably have something in it referring to the BSOD.


RE: Merge
By RogueLegend on 2/1/2008 3:23:36 PM , Rating: 2
So why do you make such a distinction between the EU and the US- the US has hit MS with fines for anti-competitive and monopolistic behavior? I'm just curious what the difference is? And in the US's case, we did it when they developed their own product (Internet Explorer) rather than buying out a company. I don't know about you, but bundling your own product is more benign behavior than purchasing another company. So is there some logic that I'm missing?


RE: Merge
By wordsworm on 2/2/2008 8:10:34 AM , Rating: 1
quote:
So is there some logic that I'm missing?


The core logic that you're missing is that it's European regulators taking steps against American companies. Most Americans don't appreciate that. Most figure that since America 'saved' Europe the last century that they don't have the right to control industries and company conduct. Many of them also believe that only America should set international laws.


RE: Merge
By Trisagion on 2/1/2008 10:38:20 AM , Rating: 2
Um, unlikely. Google, I'm sure has more than 60% of market share as is. The merger is not going to bring anything new to search. I quite frankly don't know anyone who uses MSN or Yahoo as their primary search.


RE: Merge
By omnicronx on 2/1/2008 10:43:36 AM , Rating: 2
quote:
I quite frankly don't know anyone who uses MSN or Yahoo as their primary search.
You obviously do not know a lot of people. Msn Search although terrible, is used by a number of people as it is the default search tool of Internet Explorer.


RE: Merge
By Denigrate on 2/1/2008 10:46:55 AM , Rating: 5
Only the short bus riders who don't change the default search engine to Google.


RE: Merge
By omnicronx on 2/1/2008 11:49:02 AM , Rating: 5
Exactly my point, half the people out there do not know what they are doing.


RE: Merge
By GaryJohnson on 2/1/2008 10:55:45 AM , Rating: 2
Most of the statistics I can find around the web, like the one below, show google to have a 75-80% share at the moment.

http://marketshare.hitslink.com/report.aspx?qprid=...


RE: Merge
By Oroka on 2/1/2008 11:40:57 AM , Rating: 2
Which is just oblivious people rather than real customers. If you are not computer 'saavy' and you use windows, then you proably use MSN for your search.

When I build systems fo people, I test most of the features, and usually when I fire up IE7 first thing I do is change the default search to Google. It is just better.


RE: Merge
By Snuffalufagus on 2/1/2008 2:33:06 PM , Rating: 2
so essentially you are taking away the choice they would have if you allowed them to launch IE for the first time on their own.


RE: Merge
By jtesoro on 2/2/2008 12:50:36 AM , Rating: 1
Choice was not taken away there. The end user will eventually fire up IE for the first time on their own. And they still have the choice of switching to whatever search engine they want.


RE: Merge
By FITCamaro on 2/1/2008 10:53:22 AM , Rating: 2
Actually at work my mom rarely uses Google. She's a pharmacist and I guess their search isn't great for finding info on drugs and other things pertaining to her job. I think she uses Yahoo.


RE: Merge
By jtesoro on 2/1/2008 11:16:29 AM , Rating: 2
I use Scroogle, which is actually Google. Without the cookies... without the ads... without the tracking.


RE: Merge
By Spivonious on 2/1/2008 1:53:33 PM , Rating: 2
I'm pretty sure the tracking is internal to Google, so anything that uses Google will also have the tracking.

As far as not having the cookies, just block them.


RE: Merge
By jtesoro on 2/2/2008 1:01:03 AM , Rating: 2
Well, if Scroogle is to be believed, Google won't even be able to see my I.P. address. All searches will seem to emanate from Scroogle servers, so a search can't be tied to a single individual. Regular deletion of logs and Google cookies on Scroogle servers further removes any association between a search and an individual PC.


RE: Merge
By Malhavoc on 2/1/2008 11:35:09 AM , Rating: 2
Google Scholar is a little more useful than default engine for such things. Add in Google Books and even better. I've not used Yahoo much since the days of Infoseek, when both had their purpose for me (one search engine, one directory).

Perhaps I should check it out again, but I see all the annoying crap other than the search engine on the page and I can't take it seriously.


RE: Merge
By rudy on 2/2/2008 2:26:27 AM , Rating: 2
Finally someone else who feels the way I do. Google was good when it started because most of its users were more inclined. Now that it has become the search engine of the masses it has gone down hill. This is because it factors in what people are looking for and clicking on to rank searches. When everyone started using the internet they swayed that to the crap they were looking at and more people where trying to exploit ranking as well. The good old just match up the words you are looking for works better now IMO.


RE: Merge
By GaryJohnson on 2/1/2008 10:41:44 AM , Rating: 2
Live's search results are harder to scan through for me than Google's. Probably because I've been using Google for so long.

The results from a Google search have tighter line spacing and more space relative to that amount between results. Description results from Live seem to contain either too little information or a lot of extra useless stuff compared to Google's. And then there's the not using 100% of the page width thing that Live does at high resolutions.


RE: Merge
By mondo1234 on 2/1/08, Rating: 0
RE: Merge
By TomZ on 2/1/2008 11:52:45 AM , Rating: 2
Google's market share in search (>80%), despite Microsoft's near-monopoly market share in desktop OS and browsers, disproves your assertion quite succinctly.

You can't blame all user ignorance on Microsoft. If competing companies want to get marketshare, they have to market themselves better, that's all.


RE: Merge
By Roy2001 on 2/1/2008 11:51:55 AM , Rating: 2
Combined, Microsoft and Yahoo would have almost as much Market share as Google.
---------------------------------
No, 1+1<2 when merging happens. Do you remember HP plus Compaq MSS > DELL, but HP+Compaq<DELL?


way to high of a price
By RamarC on 2/1/2008 10:33:45 AM , Rating: 2
62% premium for a stock that's heading down and company that's pruning staff. They should have waited til May/June after Yahoo stabilizes.




RE: way to high of a price
By Zoomer on 2/1/2008 10:38:03 AM , Rating: 2
Well, they do have the cash to throw around.


RE: way to high of a price
By omnicronx on 2/1/2008 10:39:00 AM , Rating: 2
Its no coincidence that Microsoft made this move now, hit them while they are down. I would imagine they would also have to pay a lot more money for a company that is no longer in distress.


RE: way to high of a price
By TomZ on 2/1/2008 11:13:34 AM , Rating: 3
No, as the article explained, the timing is more related to Yahoo board and management wanting some time to turn the company around, after Microsoft's offer last year. Clearly their plan isn't working, so this is the right time for a strategic acquisition.

Yahoo's board and shareholders would be stupid to reject this offer - it's probably the best offer that will ever come around.


RE: way to high of a price
By omnicronx on 2/1/2008 11:56:49 AM , Rating: 1
quote:
No, as the article explained, the timing is more related to Yahoo board and management wanting some time to turn the company around, after Microsoft's offer last year.
You say this as though one is not directly linked to the other. Microsoft initiated the move in the first place because yahoo was floundering, Yahoo thought they could turn it around, and would have probably not accepted any offer. Now that things have changed, here we are. Still doesn't change the fact that Microsoft is going after yahoo because they are currently in a weak position.


RE: way to high of a price
By Ringold on 2/1/2008 1:30:43 PM , Rating: 2
Going back to your original post, the contributers to CNBC have suggested Yahoo, without the offer, was on a likely one way street to a single-digit share price after a few more lousy quarters. Therefore, seems only logical the way the article, TomZ, and CNBC has been reporting it; more to do with the board and management changes than it currently being down. If they waited, it could've gone down more, and if they'd talked and asked Yahoo nicely and had a full range of negotiations all sorts of things could've leaked out or gone wrong.

A hostile bid now to get it over and done with, with management turning over and particularly before this year is out and we have an unpredictable political climate for business, was the objective. Not much to do with Yahoo currently being down.


RE: way to high of a price
By Netscorer on 2/1/2008 11:03:37 AM , Rating: 2
Microsoft made the right choice. Their agenda N.1 is to catch up with Google on Internet properties, not swallowing Yahoo at the lowest possible price. They do not know what the future will bring and once they saw a great opportunity (Yahoo stock in doldrums, disastrous Q4 results, restructuring plans) they pounced on it.
This is a capitalism at its best.


RE: way to high of a price
By masher2 (blog) on 2/1/2008 11:42:25 AM , Rating: 2
> "62% premium for a stock that's heading down and company that's pruning staff. They should have waited "

Companies rarely get bought out once they've turned the corner and are doing well. It's when they're performing poorly that they're not only most vulnerable, but most ripe to the potential that new management and new financial resources can bring.


RE: way to high of a price
By RamarC on 2/1/2008 12:18:24 PM , Rating: 2
i'm just saying a 62% premium is high for something still heading downward. closing price + 25% would have been good. or wait till it levels off and then offer current price + 50%.

but i don't have billions to throw around so what the hell do i know. ;-)


am I the only one?
By DeepBlue1975 on 2/1/08, Rating: 0
RE: am I the only one?
By TomZ on 2/1/2008 11:37:54 AM , Rating: 2
Microsoft is already operating in most/all of the businesses that Yahoo is in, so I don't think it is much of a "stretch" for them. And I also think that this acquisition/merger is necessary for them to be able to compete effectively with Google. Two big players in this space is better than one, right?


RE: am I the only one?
By omnicronx on 2/1/2008 11:58:42 AM , Rating: 2
One day when Google launches a Desktop OS, Microsoft will look back at this as a good decision. Microsoft is very afraid of Google and the power of the Internet, this move proves it.


RE: am I the only one?
By MrDiSante on 2/1/2008 12:35:57 PM , Rating: 2
No, as said above Microsoft is already in all of the markets Yahoo! is in - and a LOT more. What may not be a great thing is blowing that much cash. On the one hand if it works then Microsoft will have yet another marketall to themselves. If it doesn't then there goes like 3 years worth of profits a lot of wasted time and effort trying to swallow such a huge company, and potentially the loss of any competition in the search/whatnot market.


RE: am I the only one?
By Donkeyshins on 2/1/2008 2:06:36 PM , Rating: 2
MSN 1.0 shipped in 1995. That means they've been around almost as long as Yahoo! (1994 - incorporated in 1995) and longer than Google (1998).


Interesting
By baddadandem on 2/1/2008 12:23:17 PM , Rating: 2
Well this is funny, it was the other day I was telling a friend how much i liked the new yahoo mail functionality but at the same time i love the look and feel of windows live mail. I was telling him it would be nice if the two would merge and today I'm seeing this!! I would love for it to go through. I'm just hoping they don't nick the Imap and smtp, or maybe they'll offer pop3 free




RE: Interesting
By DarkElfa on 2/1/2008 2:53:16 PM , Rating: 2
I'm wondering what this will mean for Yahoo Widgets?


Gorillas
By ajfink on 2/1/2008 10:58:44 AM , Rating: 3
I was under the impression that the colloquialism is "800 pound Gorilla."

I've never had a reason to use anything but Google for searching. Maybe I'll toy around with Microsoft's options. Even then, any sort of integrated desktop search from any company is out of the question. No, I DON'T want to install the Google Toolbar or desktop search assistant or MSN-anything. I have the indexing services turned off and I may have used PC-based file searches maybe half a dozen times in my life. ++ for actually keeping your stuff organized.

Grawr. Pseudo-rant.




Defensive purchase.
By cochy on 2/1/2008 5:05:11 PM , Rating: 3
With Yahoo floundering Microsoft almost has no choice but to try and buy them out lest allow Google to run away with the market. Google is slowly but surely making in roads to Microsoft's core businesses, with pretty scary results. For all the crazy things that Google does that seemingly have no purpose, these guys are running a very smart business.

Google has their foot into the door of office productivity software, corporate email, mobile software. Could only be a matter of years before we have a full fledged Google OS. I could see them offering it for free to schools.

Problem for Microsoft is that Google can do all these things because they are widely profitable in online search. Google is the opposite side of the spectrum from Microsoft who can spend all their money on ventures because they are widely profitable in OS, and Office.

Microsoft vs. Google would make a fascinating book.




straight cash
By logaldinho on 2/1/2008 11:15:50 AM , Rating: 2
Reporter: “Write the check yet, Randy?”

Moss: “When you’re rich you don’t write checks.”

Reporter: “If you don’t write checks, how do you pay these guys?”

Moss: “Straight cash, homey.”

http://www.youtube.com/watch?v=5-aAitwm_yo




We are the Microsoft...
By kontorotsui on 2/2/2008 10:34:23 PM , Rating: 2
Stock value is irrelevant. Resistance is futile. We wish to increase our market share. We will add your search engine to our OS. Your software will adapt to service ours.




OMG Microsoft the Evil Empire!
By Serafina on 2/2/08, Rating: -1
By cyberserf on 2/2/2008 8:36:37 AM , Rating: 1
These clowns can't innovate so they just buy.
so many good companies destroyed because of Microsoft.

only way they make money is from bundling their software with PC sales. They would be no better if they had to compete and sell their software like everyone else.


“We do believe we have a moral responsibility to keep porn off the iPhone.” -- Steve Jobs

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