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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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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
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
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.

"It's okay. The scenarios aren't that clear. But it's good looking. [Steve Jobs] does good design, and [the iPad] is absolutely a good example of that." -- Bill Gates on the Apple iPad
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