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Yahoo Chairman Terry Semel resigns, Gates looks to solidify his online empire with the acquisition of Yahoo

Only days ago, the news broke that Yahoo was in troubled waters and sinking fast.  The Internet giant, which ranks number 2 in terms of search engine traffic and number 1 in terms of total traffic to properties, posted a declining net profit for the fourth straight quarter.  Worse yet, it announced that it would be cutting 1,000 jobs, or almost 7 percent of its workforce.  CEO Jerry Yang stated that the company was facing "strong headwinds" and had to be prepared to make big changes.

Now, an opportunity has come knocking on Yahoo's door, which holds the promise of transforming the online business world.  Microsoft Corp. made an unsolicited $44.6 billion bid for Yahoo and its holdings this morning.  The offer is one half in Microsoft common stock, and the other half in cash.

The move promises a sweet payoff for share holders, who would see their stocks soar 62% from Thursday levels, up to a $31 per share payout.

Microsoft Chief Executive Steve Ballmer was among Microsoft's big guns to be pushing the move.  He enthused that the move is the "next major milestone" for Microsoft.  He continued, "We are very, very confident this is the right path for Microsoft and for Yahoo."

Ballmer informed the media that Microsoft has been in talks with Yahoo, preparing the offer, for nearly 18 months now.  He gave Yahoo CEO Jerry Yang a personal call on Thursday night to announce the bid in person.

A Microsoft-Yahoo team would shake up the online community by creating a legitimate competitor to Google, which current stands far above the competition in terms of search engine Traffic.  Traffic research site comScore indicates that Yahoo has 22.9% of the search engine market and Microsoft owns a 9.8% share.  Together, their 32.7% share, would pose a challenge to Google's 58.4% share of the U.S. search engine market.

Microsoft revealed that it had first had broached the possibility to Yahoo executives a year ago, but was rebuffed by Yahoo's board of directors and CEO. With today's resignation of Semel, the balance of Yahoo's board could lead to a different outcome.  Semel was strongly opposed to the merger last year.

A year after Microsoft's offering, Yahoo is much worse for wear and promises to evaluate Microsoft's proposal "carefully and promptly."  As UBS analyst Benjamin Schachte puts it, "Last year, Yahoo told investors it needed more time to get on the right track.  But you only get a certain amount of time to turn things around."

Steve Ballmer stated, "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."

Google spokesman Matt Furman declined to comment, stating, "It would be premature to comment at this point."

However, its safe to say that Google is not blind to the impact a Microsoft acquisition of Yahoo would make on its competitive prospects.  It looks like Google may have a real fight on its hands for the first time in years, and Microsoft may soon add a new piece to its ever-growing empire.

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By Tamale on 2/1/2008 3:27:12 PM , Rating: 3
A Google-Yahoo team would majorly shake up the online community by creating a legitimate competitor to Google,

RE: typo?
By Anonymous Freak on 2/1/2008 3:41:15 PM , Rating: 2
Already fixed.

RE: typo?
By AlphaVirus on 2/1/2008 3:44:18 PM , Rating: 2
A Google-Yahoo team

That actually sounds better than "A Microsoft-Yahoo team".

I dont know if Microsoft is the best company to take over yahoo. Microsoft is already a big enough company in the software and hardware industry, now they are trying to push the envolope on the search engine market.

I understand they have MSN but I think thats just a light weight in the ocean against the heavy weight of Google.

My relation to Yahoo, I have it set as my homepage.
My relation to Google, I use it to search everything.
My relation to MS, well I am a Windows user.

RE: typo?
By Hydrofirex on 2/1/2008 6:48:54 PM , Rating: 2
I agree, it seems like a little much. Once you've got Yahoo merged with Windows and Microsoft products come with Yahoo standard (for instance yahoo search) you've really changed the entire equation. It's one thing for it to come with a basic net search functionality, it's another when the search will be comparable with the competition and has the lazy factor behind it.

Isn't this the Anti-trust kind of stuff that we would actually want to stop? Does Microsoft need to own the browser, search engine, online applications, and desktop market?! I think it's too much.


(Love Vista, Love my Zune, Love my Media Center PC, and can't wait to get a Windows Home Server)

RE: typo?
By Oregonian2 on 2/1/2008 7:27:45 PM , Rating: 3
Anti-trust? With the numbers given together MicroYahoo would still be in distant second place. Having secondary players join together is standard fare when markets mature.

RE: typo?
By Belard on 2/3/08, Rating: 0
RE: typo?
By Hydrofirex on 2/11/2008 6:46:10 PM , Rating: 2
Foolish; a Oligopoly is factually better for the consumer that a Duopoly.


RE: typo?
By qwertyz on 2/2/08, Rating: 0
RE: typo?
By PrezWeezy on 2/5/2008 5:13:28 PM , Rating: 2
You're right, Microsoft is just HUGE in the hardware market...

"This is from the It's a science website." -- Rush Limbaugh
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