| Microsoft proposes to
buy Yahoo!
1 February, 2008
By Chris Talbot
Microsoft has issued a proposal to acquire online network
Yahoo! for approximately $44.6 billion (U.S.) in an effort
to create a more competitive search and online advertising
business.
According to Steve Ballmer, CEO of Microsoft, the management
teams of the two companies have been engaged in conversation
regarding working together more closely, which included
discussions about a potential acquisition of Yahoo! by Microsoft,
for the past 18 months. The proposal letter written by Ballmer
and sent to Yahoo! management stated that Microsoft proposed
to acquire Yahoo! in February 2007, but that proposal was
rejected because an upside that Yahoo! saw in its reformulated
strategy.
"A year has gone by, and the competitive situation
has not improved," Ballmer stated in the letter.
In its proposal, Microsoft offered to acquire all outstanding
shares of Yahoo! common stock for $31 per share, which the
company stated represented a 62 per cent premium above Yahoo!'s
closing price on Jan. 31, 2008.
"We see this announcement as being significant for
our joint shareholders, customers and employees," Ballmer
said during a Webcast where he and other Microsoft executives
discussed the proposed acquisition with investors and analysts.
"We also see this announcement as the next major milestone
in Microsoft's company-wide transformation to embrace online
services overall and to invest very successfully in search
and advertising."
The combined strengths of the two companies would create
an efficient and competitive offering for consumers, publishers
and advertisers, Ballmer said. He stated that the two companies
share a vision for the potential of online services and
advertisement.
Even though Ballmer said Yahoo! didn't think the time was
right for an acquisition a year ago, he noted, "We're
very, very confident it's the right path for Microsoft and
for Yahoo!"
With Google being the top business in the online search
and advertising space, Kevin Johnson, president of the Platforms
& Services Division of Microsoft, suggested that a combined
Microsoft and Yahoo! could offer a strong alternative. The
industry is being increasingly dominated by one player,
and the combination of Microsoft and Yahoo! could provide
a more competitive choice for consumers, advertisers and
publishers, he said.
"The online advertising industry is a very large industry
today at over $40 billion, and it's forecasted to grow quite
rapidly to reach $80 billion in the next three years,"
Johnson said.
With those growth opportunities, Johnson also noted the
needs for significant investments in infrastructure and
servers, as well as software. A combined Microsoft and Yahoo!
could pool their resources and engineering teams to push
search and online advertising platform innovation, which
would include more focus on emerging consumer applications
like mobility and online commerce, he said. That combination
would also improve revenue yield, he added.
"We have developed a very clear integration plan that
will include leaders from both companies and a very clear
set of principles to bring the combined entity together,"
Johnson said.
Shortly after Microsoft went public with the offer, Yahoo!
issues a statement to respond to the acquisition proposal.
According to Yahoo!, it did receive the unsolicited proposal
from Microsoft and that its board of directors would evaluate
it in the context of the company's long-term strategic plans
and the best value for its shareholders.
|
