Microsoft offers unsolicited $44.6 billion for Yahoo

“Microsoft Corp. has pounced on slumping Internet icon Yahoo Inc. with an unsolicited takeover offer of $44.6 billion in its boldest bid yet to challenge Google Inc.’s dominance of the lucrative online search and advertising markets,” Michael Liedtke reports for The Associated Press.

“The surprise offer of $31 per share, made late Thursday and announced Friday, comes with Sunnyvale-based Yahoo in a vulnerable position,” Liedtke reports.

“With its profits steadily sliding, Yahoo’s stock slipped to a four-year low earlier this week and a new management team has been trying to steer a turnaround sees more turbulence through 2008,” Liedtke reports.

“In a letter to Yahoo’s board of directors, Microsoft Chief Executive Steve Ballmer… revealed in the letter that Yahoo had rebuffed a previous overture a year ago, saying it had a turnaround in the works. But he pointedly noted Yahoo has instead deteriorated significantly. ‘A year has gone by, and the competitive situation has not improved,’ Ballmer added,” Liedtke reports.

MacDailyNews Take: But, Microsoft can fix it — they’re doing so well with search on their own. In November 2007, Google Sites share of core searches stood at 58.6%. Yahoo! Sites ranked second with 22.4%, followed distantly by Microsoft Sites with 9.8%, Ask Network (4.6 percent) and Time Warner Network (4.5 percent). Source: comScore.

Liedtke continues, “Ballmer said Microsoft expects Yahoo’s board will review its proposal, but ‘reserves the right to pursue all necessary steps to ensure that Yahoo’s shareholders are provided with the opportunity to realize the value inherent in our proposal.'”

Full article here.

Microsoft’s press release and the text of the letter that Microsoft sent to Yahoo!’s Board of Directors can be seen via InformationWeek here.

[Thanks to MacDailyNews Reader “John” for the heads up.]

MacDailyNews Note: Apple’s iPhone and iPod touch currently utilize Yahoo’s search (along with Google), push email, weather services, and stocks. All of which, one would imagine, would easily replaced by Google and/or Apple (free .Mac email?) if need be.

112 Comments

  1. Interesting that Bloomberg reported that talks between the two broke down yesterday, and hence MS went public…

    It’s a big merger, and I reckon there would be one major culture clash.

    Which would embroil MS in a major waste of time and effort for little reward.

    Let’s hope it happens.

    ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  2. I saw this on NBC’s Today show this morning, and the anchors were giddy talking about it. They acted like it was just the best thing ever… and that the “consumers would benefit.” It was sad, really.

  3. “..and will be called MiSoftHoo.” “Or MiYayaSoft” “But most likely MiHoo?”

    Exactly.

    M$ thinks they can pick up 22.4% of the market for a few billion.

    But they’ll re-brand Yahoo is some amazingly stupid way, restructure it, and destroy the marketshare they bought.

    MS Yahoo! Live anyone?

  4. LiM: “merger = loser + loser”

    Not always the case… That $427M Apple paid for NeXT is looking better and better all the time!

    Although I can’t fault your math if you plug in the companies into equation on this story…

    — Chuck

  5. If they do merge, i think Microsoft should get rid of live search and just use Yahoo search, but I doubt they will , and they will destroy Yahoo even further.

    What would happen to products like Windows Live Messenger and Yahoo Messenger. YahooLive Messenger?

  6. Great way for M$ to blow a huge wad of cash and fragment its desperate efforts to grow beyond Windows and Office. The Xbox is one of M$’s few ‘successes,’ and that was achieved at the cost of years and billions in losses.

    If M$ wants to assist Apple/SJ, then this is one of the best ways that I can imagine to do so. Go merger!

  7. A sad day for one of the first real Internet brands. I think a moment of silence would be appropriate…

    Ok. Now we can let the party begin. The obvious predictions: Microsoft will run Yahoo into the ground, pretty much destroying any value it purchased. In the meantime, it has used up a sizable part of its cash reserves. We can also expect that its services will become less and less Mac-friendly, but that is ok because Google’s are going to become more Mac-friendly. This is going to be a disaster that will be great fun to watch.

  8. AAaahhhhhh Crap. I like my Yahoo e-mail account just fine. Now they will go and screw it up, just to try and topple Apple and Google. MicroBlow, If we cannot kill it, we will buy it and kill it. ” width=”19″ height=”19″ alt=”grin” style=”border:0;” />

    I wonder if it will be approved. Afterall, they are the top two searches.

    ?????

    en

  9. 44.6 billion is nothing. If you have a monopoly that is allowed to continue to operate, its no big deal. Piss away all they want, its no loss, they have guaranteed revenue year after year after year.

  10. “Tongue wax” “For hairy tongues?”

    ” rel=”nofollow”>No, actually Ballmer prefers his lingua glossy. It frightens away rodents and the lunar reflection gives him a beacon as he stalks the night.

  11. So in effect they’re saying that if they spent $44.6 billion developing their own stuff they wouldn’t be able to increase their stats by the same amount as just buying someone else. The shocking thing is not the value of Yahoo but that Microsoft are so crap that they have no other option but to just buy up the market as opposed to earning it. Of course, in the case of Microsoft it’s not that shocking but still.

  12. Hey too many people here are always ready to give so much value to money making… COME ON! Don’t play now the shocked about a pur product mentality of our $ society! Most of us wanted a wolrd of “you can get everything when having money” , now here it is… But with or without Yahoo: M$ is doomed! They won’t be getting better anyway… M$ will just kill the best of Yahoo and sink, just as if not there…!

  13. These kind of “surprises” are why Apple needs to be proactive in protecting itself. “Microsoft Makes Surprise Deal to Buy Adobe; Discontinuing Macintosh Support.”

    Admittedly, with the direction MS is going, Apple may be able to buy MS in bankrupted pieces in a few more years. But, just in case that doesn’t happen fast enough, Apple needs to identify critical support companies… and buy them.

  14. Meh, this ain’t so bad. M$ will use up tons of cash to buy a failing company, then take 5+ years to come out with improvements. By then the Apple will have even more market share and what ever POS they unveil will just look silly in comparison.

  15. As much as i like to see Microsoft lose its dominance on the computer industry, i think this is a seriously bad move for MS and don’t want to see it happen. What can MS gain from a buyout that it can’t from a business partnership? Both MS and Yahoo! are already sinking. MS, what you need to do is fire Steve Ballmer and get people who can concept a good long-term strategy with execution. Don’t buy Yahoo! Keep up the decent work on the XBOX.

  16. @don’t buy Yahoo!, MS

    What planet are you from? This is exactly what most of us want to continue happening.

    Additionally I hope MS keeps up the “decent work” on the X-box, Maybe they can incur another 1 billion dollar loss in hardware repairs this year too, all at a time when the Wii is kicking its @aa six ways to Sunday.

  17. Let ‘ em have it.

    If this exhausts MS’s cash reserves, in the long run this could be a good thing. I doubt MS will be able to succeed where Yahoo! has failed, but I’m willing to gamble loosing Yahoo! if in the long run it also brings down MS.

    And yes, I’ll be more than sorry for all the Yahoo! users who no doubt this will be a royal PITA, but the bright side is that past this bump in the road, MS won’t have as much money to be able to bribe pundits and bloggers into submission.

  18. No.
    Didn’t
    Don’t
    Decidedly Not

    I always thought it a strange name. A yahoo is a cretin – a.k.a. George ( Dubya) Bush, Rush (Oxycontin) Limbaugh, Ann (it’s a man) Coulter, Sean (The Waterboy) Hannity, Bill (The Bloody) Kristol, etc.

    Apple Distionary
    yahoo 1 |ˈyäˌhoō; yäˈhoō|
    noun informal
    a rude, noisy, or violent person.

    Yes, I think I had it about right.

  19. If at first you don’t succeed buy or copy someone else that did….
    Your Potential. Your Passion. How much do you want for that?….
    Turning quality into crap since 1975….
    Who do you want to buy today?….
    If you can’t beat ’em, buy ’em…
    When the going gets tough, the tough go shopping…
    MS. We’ll decide where you want to go today….

  20. Crap…

    I’ve been living with a Apple work-a-rounds for years now.. guess I’ll have to tell AT&T;i.e. SBC (sbcglobal.net) that I’ve had it with sbc/att yahoo and want a way out!

    Does any one know how to keep one’s AT&T;cable service with out using AT&T;’S SBC Yahoo offering?

  21. Ampar,

    Ballmer’s daughter is kinda cute, even if she does have an alien parasite living inside her. But most guys could overlook that.

    Gawd, I couldn’t stop laughing at that dog! The look on it’s face is hilarious.

    Thanks, buddy.

  22. This is not uncommon:

    1st Place has 50% Market Share
    2nd Place has 50% of 1st Place’s share
    3rd Place has 50% of 2nd Place’s share
    Misc fills out the rest…

    What’s just as uncommon…

    2nd + 3rd Place joining forces to take on 1st Place

  23. it’s highly indicative of microsh*t’s failure in the search market. Movement away from internet explorer to firefox, safari, etc which default search to google probably contributed in small part to this, in addition to google’s almost ubiquitous grip of the mentality of the typical user.

    It’s a good ploy on microsh*t’s part because it potentially boosts their search usage size 32.2% and saves them a massive amount of catchup work they could never manage on their own. Yahoo has partnerships with other media outlets as well. Yahoo’s apparently floundering management looks like the additions of microsh*t’s billions might be highly helpful, though given the way microsh*t runs things -> probably just prolonging the day of reckoning by a few years anyway. Still enhanced competition never hurt.

    My personal choice of search engine: vivisimo.com

  24. I agree with Ralph M. I read today that the cash portion of this deal (there is stock in M$ as well) is more than the cash liquity M$ has right now. They will have to borrow a bit to do the deal. They can pay it off, but, this is a big deal, even for M$ to make.

    I predict it will weaken them significantly. They will not be able to grow Yahoo. It will be just as it has been for all their other new products. Xbox loses money. Zun loses money. They have an army of engineers in Redmond working on things other than the one thing which really makes them money, the opperating system. If it was not for the perceived need to have a standard opperating system they would have died long ago. It is the very fact that they have a monolpy and the perception that one is needed that keeps their mediocre products going.

    When they need money for an emergency push to create a decent new opperating system they may miss the 22.3 billion spent on Yahoo. Yahoo will by then be just another drain on the cash flow of the company.

    Soon the layoffs will begin.

  25. This sux…this has anti-trust all over it…it so BAD for consumers…but MicroSloth knows the Bush J.D. will be their lapdogs as usual.

    Yahoo provided an alternative to the MS Beast around the world, giving consumers some choice…based on their Vista spyware habits, I would not trust my yahoo email or messenger accounts owned by MS. This is a shame 🙁

  26. “‘Ozzie’s plan – laid out in a 5,000-word memo to executives last fall and in a speech to Wall Street analysts in July – is tough love. Indeed, it’s a blunter assessment of Microsoft than any executive, including Gates or Ballmer, has probably ever made. To avoid being marginalized, Ozzie said, Microsoft needs to shift gears fast and concentrate on the software-services world. That means figuring out how to get new ideas out of the lab and into the marketplace faster, rethinking the way the company makes and sells applications, and spending billions of dollars on infrastructure, like giant server farms, to power all those changes. To a corporation that has built some of the most bloated, complex software ever to boot up, Ozzie gave this advice: “Complexity kills. It sucks the life out of developers, it makes products difficult to plan, build, and test, it introduces security challenges, and it causes end-user and administrator frustration.” Better, he went on, to “explore and embrace techniques to reduce complexity.””
    http://www.wired.com/wired/archive/14.10/microsoft.html?pg=2&topic=microsoft&topic;_set=

  27. It was only a matter of time before Ballmer did something so recklessly big and stupid. Guess that’s his nature, inside and out.

    Everyone involved with Yahoo should immediately accept this offer. And float off into the sunset on their golden parachutes…

    Funny AAPL would be down today. MSFT just offered their own death sentence.

  28. And I am afraid to find out what could happen since I’m on a Mac and currently use AT&T;Yahoo’s internet service.

    If Ma Bell is smart they’ll cash out on the Yahoo part, then offer their own AT&T;-branded service to whoever wants it. Regardless of platform.

    If MShoo gets too greedy and PC-only, expect any number of players (esp. Google) to step forward with better terms.

  29. “Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers.”

    How can Microsoft and Yahoo! together offer a credible alternative to a company (Microsoft) that has to acquire other companies in order to innovate?

  30. “LOL! When I sent this one in to MDN — I’m sure many of us did — I added the comment:

    One loser + one loser = one even bigger loser!”

    Have all Apple Fan Boys had their brain cells melted by iPhone radiation? “Losers” don’t have $44 billion pocket change laying around to buy sideline hobbies like Yahoo!

    We now return you to your regularly scheduled Apple Delusion……..

  31. “Losers” don’t have $44 billion pocket change laying around to buy sideline hobbies like Yahoo!

    Neither does MS. From Marketwatch.com:

    Microsoft reported a total of cash and short term investments of $21.1 billion as of Dec. 31, according to regulatory filings. Should Yahoo accept the offer including $22.3 billion in cash, Microsoft may have to seek additional financing.

    IOW, MS is going to have to BORROW around $22.5 BILLION tp pull this off.

    For all of Ballmer’s train wrecks, he’s finally managed to achieve the big one. MS will not survive if this deal goes through.

  32. Complete madness, this really could be the final straw.

    I can see the thinking, buying market share and established name. Trouble is Yahoo have been in decline for years.

    Microsoft as an organisation just aren’t setup for the internet. They are terrified of Google.

    All that will happen is that they will spend $$$$$$$$$ on Yahoo and end up with the same market share. It’s not as if Yahoo have any great technology to get hold of.

    This will turn M$ into a cash poor company. Yahoo must be struggling to believe their good fortune.

    The result is that the reclaim the expense if this we can all sit back and watch the already expensive licensing model rocket in price.

  33. For all of Ballmer’s train wrecks, he’s finally managed to achieve the big one. MS will not survive if this deal goes through.

    LOL! LOL! LOL! More Apple Fanboy wishful thinking? First it was the linux people that were going to crush Microsoft, and now it’s the Apple people. Microsoft just turned a record profit again last quarter, FYI. Not too long ago they made a $30 billion payout to shareholders to reduce their cash stockpile. The company has paid out nearly $100 billion in dividends and stock buybacks over the past five years. Office alone rakes in right around $1 billion per month.

    Back in the early part of the decade when the Linux Fanboys were convinced Microsoft was on the way to certain death, and linux was going to take over the world because it was “almost ready for the desktop”, they forgot to notice that Microsoft made more profit in the first week of operation of the fiscal year than all linux companies on the planet combined grossed for the entire year.

    Your statement shows how little you (and internet journalists inventing stories) really know about business. Microsoft will make the buyout with cash and fixed shares of Microsoft stock. They won’t have to borrow anything.

    And as far as Microsoft “surviving”? That’s almost laughable if it weren’t so stupid. Microsoft doesn’t run on hype like Apple does with wildly fluctuating stock prices depending on which way the wind blows on the trading floor. Microsoft has a solidly built business and their software powers the world of computers. Anything else is just a wannabee. If you own Microsoft stock you can retire on the dividends and don’t have to worry about their market cap dropping 20% in one month.

    We now return you to your regularly scheduled Apple Delusion

  34. Didn’t Ballmer boast a few years back that they’d have totally annihilated Google by now.

    I wonder if this is the ‘magic bullet’ that Steve thinks will do the trick – good luck with that Steve.

  35. Good grief, folks, it’s all saber rattling on MS’s part. They want folks to fear the mighty MS with oodles of moneys who can buy poor defenseless companies like Yahoo on whim.

    Kinda like the great Soviet Socialist armed forces before the fall of the Soviet Union parading in Red Square. (Not to be confused with the resurgent Russian armed forces strengthened with unrestrained capitalism.)

    All companies form alliances to build their strength. This can be done through cooperation and agreement on both sides or the takeover can be unsolicited and mischievous. To think that innovative companies do not buyout other companies is ignorant. It is not the act it is the motive that distinguishes or characterizes the deed.

    For those interested in history and not fanboish fantasies and MDN spin consider reading the following, if you dare.

    http://www.oreillynet.com/pub/a/mac/2002/05/10/cocoa_history_two.html

  36. @ Former Mac User aka Zune Tang:

    <i>First it was the linux people that were going to crush Microsoft, and now it’s the Apple people.<i>

    Who said anything about Apple? MS is crushing MS. Ballmer is a bigger threat to Microsoft than Google ever could be.

    The fact Ballmer is willing to run such a wealthy company INTO DEBT, all for the sake of chasing his boogeymen, says a lot about the situation at hand. The “Apple people” like myself are just trying to believe the scale of the recklessness.

    Here’s betting AAPL stock that, by the time this is done, the Compaq-HP and Daimler-Chrysler mergers will look successful in comparison.

  37. re: Ballmer said Microsoft expects Yahoo’s board will review its proposal, but ‘reserves the right to pursue all necessary steps to ensure that Yahoo’s shareholders are provided with the opportunity to realize the value inherent in our proposal.’

    ROFL!

    What this means in language that 99% of the population can understand is “If you are an existing Yahoo shareholder Microsoft will not give you any cash bonus when Microsoft buys Yahoo and destroys it’s business model”.

    Microsoft ‘innovating’ again it seems.

  38. re: It’s a big merger, and I reckon there would be one major culture clash.

    Its NOT a merger, it’s a buyout and absorb into Microsoft.

    There is no such thing as mergers, I should know I been through 2 ‘mergers’ in my career and they may sell it as such to the press and employees but when all the publicity dies down the company that is ‘merged’ vanishes and is rebranded under the ‘Owner’ company – e.g. Microsoft will swallow Yahoo and in 3 years time Yahoo will not exist, it will be yet another loss leading department in Microsoft.

  39. Time to get out your tinfoil and fix the holes in your old trusty anti-brain scanning helmut!

    MS isn’t buying a competitor or increasing ad revenues. MS is quietly buying Canada!

    Running a business in Canada and using Bell’s Sympatico as your business internet email provider? Welcome to MS Hotmail!

    Currently using Rogers as your business email provider? When (not if) MS buys Yahoo, welcome to MS Hotmail!

    When the ink is dry, MS will manage/provide email services for the two largest players in Canada!

    The linking goes deeper. Bell is part of CTVGlobeMedia and, as such, is the largest media corporation in Canada. As well, Rogers recently purchased the CityTV network from Bell as required by the CRTC. So, email is just the tip of this bloated iceberg. MS will have seemingly direct ties, with possible exception of the CBC, to an absolute majority of the content that is seen, heard or read by 30 million Canadians.

    And with Yahoo’s recent acquisition of Zimbra, an open source messaging and collaboration solution for Linux or OS X servers, MS will also quietly absorb a strong contender/alternative to Exchange and we’ll watch Zimbra quietly fade away into the MS abyss, failing to reach it’s true potential.

    2008 will be an interesting year!

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