Blog Post

Microsoft Offers to Buy Ailing Yahoo for $44.6 Billion

In a surprise move, Microsoft proposed today to buy Yahoo! for approximately $44.6 billion in cash and stock. “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,” said Steve Ballmer, chief executive officer of Microsoft in his open letter to the Yahoo!’s Board of Directors.

Yahoo, squeezed by Google on the search engine side and Facebook and MySpace on the online community side, confirmed a week ago to various mainstream media it was poised to lay off 1,000 workers in an effort to revitalize the company and its flagging stock price. Earlier this week, Yahoo’s shares fell almost 10 percent after three analysts cut their ratings on the company.

They buyout offer of $31 a share of Yahoo common stock – a 62% premium to the current price – would see approximately $44.6 billion change hands and be structured as a half cash, half Microsoft stock deal.

Microsoft cited in its bid the chance to create a online advertising titan equal to Google: “The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners.”

What do you think of this development? Should the deal be accepted, aside from storing your bookmarks on Microsoft and getting your photos from Microsoft Flickr, will it affect the way you work?

19 Responses to “Microsoft Offers to Buy Ailing Yahoo for $44.6 Billion”

  1. Snarky Shark

    The underreported issue here is that Yahoo hasn’t had any innovation in search. In fact, not much since 1994. The other properties are irrelevant and can’t save them. In fact, the only real innovation I’ve seen recently is ManagedQ.

  2. @Andrew
    I think you’re totally right about the exodus of good open source developers if/when M$ buys Yahoo! I know I’d quit if I were a Yahoo! employee or just ride out the retention bonus and then bail.

  3. Anti-Trust problems too? I’m not so concerned about the search, there’s plenty of competition out there – same with a fair number of Yahoo properties but there are a few that are not such a big market – Zimbra – going after MS’s Exchange market etc. Would Yahoo be forced to sell off a tonne of it’s services if it were to accept a MS buyout offer.

  4. Something inside me tells me that this deal would not go as expected if it takes place. This deal spells doom for the free web culture that we are used to for years.

    Microsoft’s oppressive monopolistic culture could possibily kill Yahoo and services that we have come to assoiciate Web2.0 with namely Flickr and

    For more on this read my thoughts at my blog here :

  5. It will impact how I work in regards to things like the YUI development resource site.

    I doubt MS will allow things like Yahoo! Maps to continue in their current incarnation. I fully expect the YUI! Developer Central resources to disappear. I wouldn’t be surprised to see the Pattern Library close and OpenID to quietly be dropped.

    I use all but the latter on my client’s sites, so yes, this will impact my work habits.

    The real reason behind MS’ acquisition (search and ad serving) couldn’t concern me less. I’m not in the Yahoo! portal system and I don’t use Flickr or, but now I know I’ll never be a customer.

    Frankly, I don’t expect anybody to be happy in 12-18 months as this acquisition will not help MS. The only people who benefit are current Yahoo! stock holders. I expect an exodus of Yahoo! developers and MS trying to replace Yahoo’s tech infrastructure with MS products. What a distraction and costly mistake.

  6. Even before I got to the end of the article, I was already thinking, hmmm, how will this impact and flickr, which are indeed the only two yahoo properties I use. So it was wonderfully ironic to see those mentioned specifically at the end!

    That being said, the joe-user part of me doesn’t care so long as my fave sites aren’t tainted. But the larger part of me is wondering about the new monopoly system that is evolving on the web.

  7. I don’t think we should be too surprised, Microsoft needs an answer to Google’s challenge on their core business and each one is moving fast into the other’s territory. As customers, I believe it’s good for us, so far we enjoyed the fruits of this competition. Will be interesting to see where this will lead.

  8. Update: This morning’s Microsoft conference call did not add any real news – the big question is will Yahoo accept, hold out for more or fight? And if they fight, how far is Microsoft prepared to go? Two questions I did not get to ask:
    1. How does Microsoft plan to assimilate Yahoo’s mostly Open Source internal and external developer community?
    2. Does Microsoft plan to push Silverlight hard via Yahoo, if it succeeds in buying the company?