Microsoft Bids $44.6B for Yahoo

[Marcia]

Just a brief clip on Yahoo News dated Feb. 1, 2008:

Microsoft to Pay $31 Per Share for Yahoo, Totaling $44.6 Billion in Cash and Stock [biz.yahoo.com]

Microsoft Corp. offered to buy search engine operator Yahoo Inc. for $44.6 billion in cash and stock in a move to boost its competitive edge in the online services market.

And here's a Press Release with today's date:

Microsoft Proposes Acquisition of Yahoo! for $31 per Share [biz.yahoo.com]

REDMOND, Wash., Feb. 1 /PRNewswire-FirstCall/ -- Microsoft Corp. (Nasdaq: MSFT - News) today announced that it has made a proposal to the Yahoo! Inc. (Nasdaq: YHOO - News) Board of Directors to acquire all the outstanding shares of Yahoo! common stock for per share consideration of $31 representing a total equity value of approximately $44.6 billion.

It's hitting news sites one after another now.

From Fortune's Daily Briefing [dailybriefing.blogs.fortune.cnn.com]

Microsoft’s letter to Yahoo further indicates that a year ago, Microsoft approached Yahoo’s board but was told that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.” Given the plunge in Yahoo stock and the prospect of a damaging recession this year, if now isn’t the right time, it’s hard to imagine what is.

[edited by: Marcia at 12:02 pm (utc) on Feb. 1, 2008]

[foxtunes]

Wow!

[mil2k]

Just saw this on CNBC Network 18.

It's a hostile bid?

Even if they go ahead with the deal, its expected to complete in second half of 2008. Google still has at least 1 year time (many more years if you consider the quality of their search index and the number of tools and utilities they have up their sleeve).

I would be happy if Microsoft takes over Yahoo. Whether it will help Microsoft get more market share in Search Industry is something only time will tell.

[gethan]

Wow

Picked up by CNN (TV international) now from their headlines - "internet advertising set to double over the next 3 years to $80 billion". Justification for Microsoft's move? - on the cusp of a recession this takeover has got to be good news for the internet sector in general.

The offer, contained in a letter to Yahoo's board, represents a 62% premium above Yahoo's closing share price on the Nasdaq on Thursday.

BBC Report http://news.bbc.co.uk/2/hi/business/7222114.stm [news.bbc.co.uk]

[tictoc]

I thought this was coming... especially after Bill Gates kind of hinted for something big to happen on CNBC the other day.

I just hope they keep Yahoo's properties under the Yahoo name but put in Live search.

[foxtunes]

Could be perfect timing from uncle Bill, swooping when Yahoo just laid off 1000 staff.

Yahoo mail and hotmail, plus Live search and Yahoo search. If they do buy Yahoo out I wonder if they'll keep the email and search as seperate entities or blend them into a LiveYahoo Goliath.

[Jon_King]

Since it is just a proposal at this time, do you think there will be other bidders? Maybe a Telcomm or large media company?

[Marcia]

The text of the letter is included in their press release, which is astonishing, that it's been made public like that. I find it hard to imagine that such a letter came out of the blue with no prior verbal discussion with Yahoo, especially with a conference call already set up.

Microsoft will host an analyst/investor conference call at 8:30 a.m. Eastern Time/5:30 a.m. Pacific Time to discuss today's announcement.

[edited by: Marcia at 12:55 pm (utc) on Feb. 1, 2008]

[graeme_p]

I can see problem wiht regulators - and for the rest of us.

No, the problem is not combining the search engines - given Google's dominant position that is not a problem. The problem is all the markets where both MS and Yahoo are strong: IM and Webmail (not as much of a problem because network effects are limited) for a start.

Also, remember what MS did with Hotmail and Opera? What if they did something similar with the whole of Yahoo?

Regulators might impose conditions (i.e. make MS sell some bits of Yahoo), but that might not be what MS wants.

I can imagine Yahoo shareholders going for it, but I do not think regulators will like it, nor is it necessarily good for the rest of us.

As for knocking Google off their throne. I do not think that any of their current rivals will do it. It will be some little startup with really fresh thinking.

[angiolo]

So in the future only two search engines to optimize for..... :)

[BillyS]

Personally, I would think they'd use the Y! search engine. Based on the progress over the last couple of years, MS underestimated the difficulty of creating a world class search engine.

[runarb]

Looks like many investors think this will go through. Yahoo stock is up 58% in pre-market trade: [finance.yahoo.com...]

[belege]

What does yahoo have, that Microsoft doesn't? Becuse 45 B is a lot of money, considering that Microsoft isn't overevaluated like the other online companies. Makes you wander what is going on behind the closed doors.
And certainly Yahoo users aren't really Microsoft fans, so I guess a lot of Yahoo users won't be happy whit this move.

[syber]

What does yahoo have, that Microsoft doesn't?

The names and addresses of over 400 million internet users

[walkman]

wow. I am shocked. They have so many redundacies and $45 billion is an astonishing number to pay for their market share, but MSFT must have run some numbers.
The timing is perfect: Yahoo is way down, and even google disappointed. No investors can seriously expect that Yahoo will improve to more than $31 in the next year or so. IOn short, MSFT wins as enough investors will gladly accept their offer.

I really, really, really hope that MSN search is kept. Freaking Yahoo has me banned since the Inktomi days, some 10 years ago.

[edited by: walkman at 1:42 pm (utc) on Feb. 1, 2008]

[drall]

hahaha I called that 3 years ago and 3 weeks ago and was mocked for it, told ya!

Now the real fun begins:)

[belege]

I don't think Microsoft wants the names and addresses of Yahoo's users. They would get a lot more accurate and complete data from telco companies, or they could hire somebody to gather this data really cheap, especially since many users submit bogus data.
It's obvious Microsoft sensed the Google's weakness and now they makes their move. Google doesn't have too much room to grow, and Microsoft will drain their ad revenues by consolidating their market strength. Google didn't made any good business decision for a very long time. Youtube is an economical disaster, Myspace the same. You can't make money with useless beta products and wasting shareholder's money.
Only a miracle can stop the Google bubble to burst.

[weeks]

The $44.6B is the value of the brand. Not the mailing list, not the technology, not the office chairs, not the executives or the employees.

And, yes, that is amazing.

[graeme_p]

I think it is pretty clear what MS wants:

1. Yahoo search, which better than MSN search.
   
2. The huge Yahoo network of sites (Yahoo itself, Flickr. etc.) to buy what they could not build MSN into[/li]
   
3. A dominant position in INstant Messaging (Yahoo + MSN)[/li]
   
4. Stopping Yahoo backing technologies that compete with MS technologies - e.g. OpenID and Email sender ID type stuff[/li] - and possibly favour IE.

Of course the problem is that changing and merging the sites is going to be difficult: the usual problem with huge mergers, but all the worse for being a technology business.

[FromRocky]

It costs 45B to get 15% or 3B per 1% global search market share. Price has been inflated. Hope I have one percent market share.

[LizaJane]

I'm no economist, but I think this is a very interesting play.

So why is Microsoft's $tock dropping with this announcement?

[drall]

I was just listening to the concall with MS 15 mins ago and they made it very clear, they are going after Google by using key pieces of Yahoo.

[tracking90]

Microsoft buying Yahoo is going to create major issues for advertisers and consumers alike. There will be fewer options for advertisers in both search and display. Microsoft will have an easier time setting its prices higher because there will be less places for advertisers to turn.

Consumers will have fewer choices and only be able to choose from the advertisers that can afford the increase in price. Consumers will not get the best bang for their buck.

I'm extremely nervous about the buyout. Anyone else having these feelings?

[amznVibe]

Did you notice the "forceful takeover" language?

Ballmer:

"Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders
are provided with the opportunity to realize the value inherent in our proposal."

[edited by: amznVibe at 2:34 pm (utc) on Feb. 1, 2008]

[Kufu]

This seems like a desperate move. MS is dumping software profits into an investment that is losing market share. It would be especially disastrous if MSN decides to replace the Y! Search with MSN search.

[sobole]

Ah yes,
We are seeing the death of search results. I remember a day when if you didn't get good ranking in one search engine it didn't matter because there were many others to take up the slack. Now, if you're not good in Google, forget it...

[jlara]

Microsoft buying Yahoo is better than Google doing it and owning 90% of search!

[tracking90]

Kufu - This is a great move for MSN. It eliminates a competitor, increases its search market share to become more competitive with Google and basically holds a monopoly on display.

[whoisgregg]

What does yahoo have, that Microsoft doesn't?

The names and addresses of over 400 million internet users

Most of those users are running Windows, so Microsoft already "knows" them. I don't know though, is almost $90 per user [google.com] the going rate?

$44.6B is the value of the brand

Maybe in 1999/2000, but today? I think $44.6B is the cost of destroying any possibility of a GOOG/YHOO merger. It seems a desperate move by Microsoft to play catch up with Google. In five years will this have made any difference if Microsoft still can't launch a quality search product?

Plus it takes time to absorb a company... At this point even a six month hiatus while Yahoo & Microsoft figure out how to organize is going to be six months that Google launches even further ahead.

[peterdaly]

Can someone summarize the conf call?

This is very interesting. It will be hard for Yahoo to say no.