3/Feb
2008

Microsoft Bids $44 Billion for Yahoo


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Jerry Yang, the chief executive of Yahoo, was finishing a regularly scheduled company board meeting Thursday night when his assistant interrupted him with an urgent phone call.

It was Steven A. Ballmer, the chief executive of Microsoft, and his message was curt. He did not call to negotiate. Microsoft would make public a hostile $44.6 billion offer for Yahoo early Friday morning in a bold move to counter Google’s online pre-eminence.

Mr. Yang, in shock, rushed back with the news to his directors, some of whom were getting ready to leave Yahoo’s headquarters in Sunnyvale, Calif. The board meeting was no longer over; it would turn into a strategy session that stretched into the night.

Don’t let Microsoft buy Yahoo!, originally uploaded by robsv.

The message that jolted Mr. Yang also jolted the technology industry. Yahoo, founded by two Stanford graduate students, Mr. Yang and David Filo, was once the leader of the dot-com world. But it has been dethroned in recent years by Google, itself founded by two Stanford graduate students.

For its part, Microsoft has struggled to compete with Google’s ever-widening lead in search and advertising as the computer world shifts from desktop products to online software and services supported by ads.

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Each company has persistently tried to best Google but failed. “No one can compete with Google on their own anymore,” said Jon Miller, the former chairman and chief executive of AOL, which itself is struggling to compete in online advertising. “There has to be consolidation among the major players. It has been a long time coming, and now it is here.”

If consummated, the deal would instantly redraw the competitive landscape on the Internet. And it would escalate the rivalry between Microsoft and Google, already the most intense high-stakes battle in the technology world, over who will dominate the booming online advertising business.

The offer of $31 a share represents a 62 percent premium over Yahoo’s closing stock price of $19.18 on Thursday, a far cry from its peak of $118.75 right before the dot-com bubble crash. The offer includes stock and cash and is likely to put intense pressure on Mr. Yang and Yahoo’s board, which ended earlier merger discussions with Microsoft about a year ago.

Microsoft shares fell 6.6 percent Friday, to close at $30.45; Yahoo rose 48 percent to close at $28.38.

Yahoo has spent billions of dollars in recent years to develop better search and advertising technology, and started a clumsy effort to create Hollywood-style entertainment for the Web. But Yahoo’s growth has lagged, prompting Mr. Yang, who was appointed chief executive last summer amid growing shareholder dissatisfaction, to announce major layoffs this week — 1,000 of its 14,300 workers. He also warned investors that a turnaround was not likely until 2009.

For Microsoft, the bid underscores both the company’s urgency and its determination to succeed online. “I personally thought long and hard about this,” Mr. Ballmer said Friday morning after the bid was announced. The bid for Yahoo, he said, was “the right path.”

The two companies, distant No. 2 and No. 3 players in Internet search, previously considered combining into a more powerful force that would have the power and audience to take on Google, No. 1 by a wide margin in both Internet search and online advertising.




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Written by admin · Filed Under General Things,Internet,World News|

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