Yahoo Chairman Resigns, Microsoft Bid Offering Heats Up
February 1, 2008 11:51 AM
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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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Search is not a core competency of Microsoft
2/4/2008 12:10:20 AM
Let's face it, Microsoft is simply not the company that would be able to make Yahoo competitive with Google. Microsoft figures it can solve any problem if you throw enough money at it. Google's success is driven in part to their unique way of addressing current problems. Sites are more complicated and more unorganized than ever before (ex. Myspace.com). What's Google's solution? Clean homepage, few links to change the search and nothing else. iGoogle is great because it's as simple or as cluttered as you want. Yahoo needs to simplify their homepage, and integrate its search into more 3rd party sites. Also, they need to quit bundling their f-ing toolbar into every piece of shareware. Yahoo can compete with Google, but you need to leave it up to Yahoo to figure out. Bring Microsoft in and you're going to a lot of "in the box" type thinking. In all likelihood, however, Microsoft will own Yahoo shortly. Hopefully, despite their history, they will learn a few lessons from google and we'll see a more competitive search marketplace in the coming years.
"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
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