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?

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