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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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I remember when there was no Google...
By cyriene on 2/1/2008 6:16:02 PM , Rating: 2
These articles all talk about MS and Yahoo needing help to compete with Google. Well, I remember a day when there was no Google and I had to use MSN, Yahoo, Alta Vista, Infoseek or even Web Crawler way back. Then Google came along and kicked butt with a good sinple search engine.
I think if MSN and Yahoo had paid more atention to making a good search engine instead of seeing how much crap they could stuff on a page at one time they might not be in this position right now.

RE: I remember when there was no Google...
By HackSacken on 2/5/2008 12:45:09 PM , Rating: 2
I agree. Lycos in the day was my search engine of choice. Google took over because of its simplicity and the obvious excellent search capabilities. It's light-weight webpage was so helpful in the day of 56k of not taking 1 minute to load my homepage (exaggerated of course) and still helps to this day of not over-loading me and my pc with extra content that isn't needed.

But that is neither here nor there.

By Axbattler on 2/5/2008 1:56:53 PM , Rating: 2
For me, it was always about Meta-Search Engines. Frankly speaking, I never had much trouble with the Yahoo Search Engine. But when it came to something really difficult to find, there was no single search engine that did it all in my view. I do use Google these days for no real reason other than it being the default search engine in Firefox, and I see no need to switch back to Yahoo.

I don't remember much about the Lycos search engine other than I found it useful a couple of times. But I absolutely despise their webmail. The interface hasn't changed for as long as I remember, and it is not like there was no room for improvement (for a start, it would be nice to be able to view more mails on one page - the screen looks optimised for 640x480 - and only that resolution). And every now and then, you are completely locked out of your account while they advertised for Jubii (not everyone encounter this problem, but Googling around, I am not the only one).

"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs
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