Microsoft offers to buy Yahoo for $44.6 billion

[sumitsehrawat]

Microsoft offers to buy Yahoo for $44.6 billion
Source: http://www.reuters.com/article/innovationNews/idUSWNAS894220080201

NEW YORK (Reuters) - Microsoft Corp has made an unsolicited offer to buy Yahoo Inc for $44.6 billion in cash and stock, seeking to join forces against Google Inc in what would be the biggest Internet deal since the Time Warner-AOL merger.

In its boldest-ever acquisition move, Microsoft said on Friday it offered $31 per share for Yahoo, or a 62 percent premium over the Internet media company's closing stock price on Nasdaq Thursday.

Yahoo, whose shares jumped to $30.75 in premarket trading, said it would evaluate the bid.

Microsoft shares, which have a market capitalization of about $300 billion, fell 6 percent to $30.78.

Speculation over a Microsoft move on Yahoo has swirled for at least a year, as investors wondered whether the two would seek a joint stand against an ever more powerful Google.

Internet audience researcher comScore estimates Google's share of the worldwide Web search market has reached 77 percent, while Yahoo is second with 16 percent and Microsoft was a distant third with 3.7 percent.

"Microsoft's wanted to do things that could build up its online business dramatically," said Brendan Barnicle, an analyst at Pacific Crest Securities. "This is going to be a big bet for them. But I also think it's where they see the market going, so they really needed to get there.

"This is more than a shot across the bow at Google, because you put these two guys together who are basically two and three in search and makes them far more relevant," he added.

Critics of a tie-up, however, have pointed out that Microsoft and Yahoo have very different corporate cultures and many overlapping businesses, from instant messaging to email and advertising, as well as news, travel and finance sites.

"To me, the premium seems exorbitant, for what is a dwindling business. I personally don't see how the synergies of Microsoft-Yahoo is going to take on Google," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC.

Yahoo attracts more than 500 million people monthly to a range of media sites including Yahoo Mail, the world's biggest e-mail service for consumers.

It has been losing market share to Google in the increasingly strategic Web search market, and warned earlier this week that Yahoo faced "headwinds" in 2008, forecasting revenue below Wall Street estimates.

Microsoft said the online advertising market is growing rapidly and expected to reach nearly $80 billion by 2010 from over $40 billion in 2007. It added it is "increasingly dominated by one player," referring to Google.

"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," Microsoft Chief Executive Steve Ballmer said in a statement.

Microsoft, the world's largest software company, said it had identified four areas that would generate at least $1 billion in annual synergies for the combined entity.

Under the proposal, Yahoo shareholders can choose to get $31 cash, or 0.9509 of a share of Microsoft common stock. The deal in aggregate must consist of one-half cash and one-half Microsoft common stock, it said.

Mark May, analyst at Needham & Co, said that while the price is a premium to Yahoo's recent trading price, it was in line with its average trading value over the last 2 years.

"I would not be surprised to see this bid have to be raised over time," he said. "I think there are companies out there like Comcast (Corp) and Viacom (Inc) and others that still need to address the emergence of online media and haven't. So there are clearly other strategic companies out there."

The Microsoft-Yahoo deal would be the largest in the Internet market since the $182 billion purchase of Time Warner Inc by AOL in 2001, which was seen as the worst merger in recent corporate history, with clashing corporate cultures and many of the promised synergies never materializing.

(Reporting by Franklin Paul and Tiffany Wu; Editing by Lisa Von Ahn/Jeffrey Benkoe)

Thanks,
Sumit

[crsnadar]

Let's see what happens...

As of now this deal doesn't seem to come to a solution...as we know...YAHOO denied to accept deal & demanding more if Microsoft still wanna aquire...

[sumitsehrawat]

Fierce battle rages over Yahoo/Microsoft deal

Source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/11/BUF7103GMT.DTL

Microsoft Corp.'s takeover bid for Yahoo Inc. has yet to succeed, but that hasn't stopped preparations for what would be the next step - the regulatory battle.

Both Microsoft and rival Google Inc. have started opposing campaigns to woo Washington public interest groups, as part of a broader lobbying effort aimed at knifing each other in the back. Center for Digital Democracy and Consumers Union, two organizations that often pressure antitrust regulators to block mergers, have held a number of discussions with both companies.

"They'll do anything to attempt to undermine each other," said Jeff Chester, executive director of the Center for Digital Democracy.

It's a window into how competition plays out in Washington, where gaining allies or muting criticism is an important part of corporate strategy. The gamesmanship can help sabotage a challenger's plans or limit them.

With its bid for Yahoo, Microsoft hopes to bolster its online business by creating an Internet colossus. But so far, Yahoo has rebuffed the overtures, calling the offer - originally valued at $44.6 billion - inadequate.

As an alternative, Yahoo is considering a three-way partnership with Google and Time Warner's AOL that would keep the Sunnyvale Web portal independent. Word of the complex alliance emerged Wednesday, adding a layer of intrigue to the two-month merger drama.

Microsoft has its own options, including some discussions to make a joint bid with News Corp., owner of the MySpace social-networking site. Despite the talks, analysts said Microsoft will probably forge ahead alone and will likely prevail in its acquisition effort.

Google fears that a combined entity could limit user access to rival Internet products and give it too much control in e-mail and instant messaging, areas where it would hold dominant market share. Left unsaid is that Google's position as the leader in online advertising could also face a serious challenge, particularly in what's known as display advertising, which is the equivalent of online billboards.

Chester said he has spoken to Microsoft's lobbyists by phone and in person a number of times, as they try to win his support for the merger or, at least, diffuse any opposition. They explained, as they have publicly, that combining forces would create a more serious competitor to Google's juggernaut.

Google's pitch, Chester said, came at an event it hosted two weeks ago about privacy at its Washington office, after a dinner of filet mignon, with a few dozen people. A Google political strategist pulled him aside and asked that he help to scuttle the deal, Chester said.

"I'm seen as somebody who can influence the press and as someone who has contacts in the Federal Trade Commission, and frankly as a troublemaker," Chester said.

In fact, Chester hasn't taken a position on the merger, given that there hasn't even been an agreement. In any case, he said that it's so complicated that it can't be can't be simply described as good or bad.

"There are questions that have to be addressed," Chester said.

Google declined to comment. But it has made its views known in a blog post in February by David Drummond, Google's chief legal officer, who raised several questions about a deal and called on policymakers to get involved.

Microsoft did not provide a spokesman for an interview. In a letter to members of Congress just after its bid for Yahoo, it cast the merger as "pro-competitive" and a boon to online advertisers and publishers.

The Justice Department and a handful of congressional committees have expressed interest in reviewing any merger. Attorneys have said that such a deal would be bound to receive intense scrutiny, particularly because of Microsoft and its past run-ins with regulators over it business practices.

"With Microsoft, there will be greater attention paid to antitrust than with other companies," said Steve Diamond, a law professor at Santa Clara University.

Any Yahoo partnership with Google for search advertising beyond a current two-week test and an alliance with AOL would also likely be reviewed. House Judiciary Committee Chairman John Conyers, D-Mich., said Thursday that the potential deals underscore the need for a hearing about competition on the Internet and online advertising.

Chris Murray, senior counsel for Consumers Union, said his discussions, with both Microsoft and Google, will help him decide what position to take on a merger or its parts. Although both sides seek his support or to limit his criticism, the talks also save a lot of time in terms of getting basic information about a proposed deal.

"Formal letters going back and forth between the parties move at the pace of months, versus discussions where I can come in with a straight-ahead question."

[sumitsehrawat]

Source: http://www.reuters.com/article/ousiv/idUSN0540560220080506
Google in driver's seat after Microsoft-Yahoo bust

NEW YORK (Reuters) - Yahoo Inc may not be celebrating the end of takeover talks with Microsoft Corp, but their mutual rival Google Inc should feel free to pop the champagne cork.

The rift between Microsoft and Yahoo leaves the online advertising market wide open to Google's expansion. What's more, it puts Google in the coveted position of deciding the fate of its closest rival, analysts said.
Microsoft withdrew a $47.5 billion offer for Yahoo on Saturday after the Internet company dug in for a higher price.

Yahoo investors see only two viable options -- returning to negotiations or letting Google serve up some of its search listings since it makes more money off the ads.

With Microsoft holding firm for now, that leaves Google in the driver's seat when it comes to determining Yahoo's fate.

"It's good news for Google. They will continue to grow their dominant share," said Jane Snorek, senior technology analyst at First American Funds. "In the long run, I just think the Yahoo customer would go directly to Google."

Google and Yahoo are still working out the details of a potential search deal and are sharing the plans with antitrust regulators to dispel concerns, a person close to Google said on Monday. But no final agreement has been reached yet.

A deal be would icing on the cake for Google, adding about $1 billion in annual revenue and about $1 to earnings per share, assuming a 50-50 split on ad revenue, Snorek said.

While Google doesn't need the partnership on its own account, it may have a defensive interest in reaching a deal.

"They're doing it more as a favor," she said. "Google can't let Yahoo fall to $15 again because they can't have Microsoft buying Yahoo."

An ad deal with Google could add as much as $6 a share to Yahoo's stock price, based on the results of a test between the two companies, a person involved in the discussions said.

THERE GOES THE COMPETITION

Yahoo, however, is now viewed in need of a deal to prop up its value after rejecting a $33-per-share offer from Microsoft. Chief Executive Jerry Yang insisted the company is worth $37 per share, but Wall Street doubts it can get there alone.

Google last month waved off fears that it would suffer from a U.S. economic downturn, reporting 42 percent gross revenue growth in the first quarter. Yahoo posed a 9 percent rise for the period, or 14 percent excluding payments to ad affiliates, and expects 3 percent to 15 percent growth for the full year.

Sanford C. Bernstein analyst Jeffrey Lindsay estimates Yahoo's stand-alone value at closer to $25 per share, leaving out any deal with Microsoft or Google. Yahoo shares closed at $25.72 on Tuesday.

"If it turns out that Google was just being used to thwart Microsoft, I think the investor reaction will be very negative," he said. While Google is by far the leader in search, a combined Microsoft and Yahoo could have presented a challenge in new frontiers of online advertising, from Web video to messaging and mobile Internet.

"That's where there is open territory for anybody to win. Google stands to continue to further distance themselves from the pack," said Dan Davidowitz, portfolio manager at Polen Capital Management which owns shares in Microsoft and Google.

On the flip side, a Yahoo-Google alliance is widely expected to draw regulatory scrutiny for combining the Internet's two largest players.
Sarah Fay, CEO at media buyer Aegis Media North America, said a combination of the two would be the closest thing yet to a monopoly in the online advertising space.

"What Google is missing now is true depth of offering in display, e-mail and instant messaging, and those are areas where Yahoo is very strong," she said. "It feels a bit like too many eggs in one basket."

Derek Brown, analyst at Cantor Fitzgerald, said Yahoo should still think twice before it gives up even a segment of its search after investing to upgrade its technology.

"If part of Yahoo's mission is to become a one-stop shop for people looking to buy all types of online ads, then outsourcing search ... seems like a step backwards," he said.

But if Yahoo's ultimate aim was to avoid Microsoft's embrace, a long-term Google deal could buy it time to advance elsewhere while warding off the unwanted suitor.

"It's more of a poison pill if they don't have an out clause ... and it's multi-year," said Todd Dagres, general partner at venture firm Spark Capital.
(Additional reporting by Anupreeta Das in San Francisco; Editing by Braden Reddall)