- Related Stories
-
At Yahoo, a need to hit refresh
January 28, 2008 -
Microsoft's new search guru talks strategy
September 26, 2007 -
Commentary: Pros and cons of a Microsoft-Yahoo mashup
May 4, 2007 -
Yahoo taking on Google, Microsoft for AOL?
October 14, 2005 -
Experts: Microsoft-Yahoo alliance is food for IM worms
October 12, 2005 - Related Blogs
-
Yahoo: Terry Semel off the board
January 31, 2008 -
Yahoo Messenger for Vista reaches new speeds
January 31, 2008 -
Yahoo serves up layoffs but no strategy
January 29, 2008 -
Yahoo to lay off 1,000 as profit drops
January 29, 2008
In its response, Yahoo called the Microsoft bid "unsolicited" but did not reject it.
Microsoft's offer, which was contained in the letter to Yahoo's board, amounts to $31 a share and represents a 62 percent premium over Yahoo's closing price on Thursday. Microsoft said it will offer shareholders the option of cash or 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," Microsoft CEO Steve Ballmer said in a statement.
News.com Poll
Yahoo said in a responding statement that its board "will evaluate this proposal carefully and promptly, in the context of Yahoo's strategic plans, and pursue the best course of action to maximize long-term value for shareholders."
The deal comes as Microsoft and Yahoo have both struggled to compete against Google.
Microsoft didn't mention Google by name in its announcement, but it did indicate that its acquisition bid was aimed squarely at its rival.
"Today, the market is increasingly dominated by one player, who is consolidating its dominance through acquisition," Microsoft said. "Together, Microsoft and Yahoo can offer a credible alternative."
In a conference call Friday morning, Ballmer said that Microsoft and Yahoo "really do share a vision for the potential of online services."
Microsoft said in its statement that it believes that it can get all of the needed regulatory approvals and that the deal, if ultimately approved by Yahoo shareholders, could be completed in the second half of the year.
Michael Gartenberg, an analyst at Jupiter Research, said it's "clear that there is increased pressure on Microsoft from Google, and they recognize that. Way back when, Yahoo wasn't that interested in a Microsoft deal. What a difference two years make. Microsoft has a pile of money, and Yahoo has experienced problems of its own. Ballmer, in the past, has historically not loved these types of deals. It is indicative of how different the world is now."
Gartenberg added that the deal "absolutely" makes sense. "But there is a lot to be done in the details. Getting this deal done might be the easiest part. The real challenge is what happens when they finish the deal. This is not a panacea--the details will be what matters," he said.
Rumors that Microsoft was interested in Yahoo have bubbled up from time to time, including the past two springs, on the eve of Microsoft advertising conferences.
The move would be by far the largest acquisition ever for Microsoft. Its largest prior deal, also in the online-advertising space, was last year's $6 billion deal to acquire Aquantive.
Asked on the conference call why Microsoft still needs Yahoo after buying Aquantive, Ballmer pointed to Yahoo's reach with consumers.
"Certainly from a consumer perspective, there's no better way to increase scale and capacity than this acquisition," Ballmer said.
Microsoft also pointed to the intense investments needed in data centers and technology needed to compete with Google.
"Scale matters," said Kevin Johnson, president of the Microsoft division that houses Windows and online advertising. "Some of the scale economics can kick in rather rapidly."
Ultimately, Ballmer said, the deal should help Microsoft become profitable in online advertising.
"We've been losing money," Ballmer said. "Our plan would be to not lose money in the future."
In a letter sent to Yahoo's board late Thursday, Microsoft confirmed that it has had talks with Yahoo since 2006 but that its suggestions of an acquisition had been rebuffed.
"In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together," Microsoft said. "These discussions were based on a vision that the online businesses of Microsoft and Yahoo should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected."
The letter goes on to say that an offer in February 2007 was also rejected. Although at one time, Microsoft was open to other kinds of partnerships with Yahoo, the company says now it just wants to own Yahoo outright.
"While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing," Microsoft said in the letter.
In the conference call, Ballmer said that when Microsoft first talked to Yahoo more than a year ago, it believed that a merger would have benefits to both companies.
"We believe now in those benefits more than ever," Ballmer said.
The public offer follows Yahoo's disappointing earnings report on Tuesday, which sent the company's shares down. Yahoo CEO Jerry Yang said Tuesday that the company is facing "headwinds." He also announced 1,000 layoffs.
Terry Semel, Yahoo's former CEO, who left that position last summer but remained as nonexecutive chairman of the board, left the company altogether on Thursday.
Microsoft's move validates Yahoo's value and could bring out other prospective buyers, said Danny Sullivan, editor of Search Engine Land. However, Microsoft doesn't have enough of a plan as to how it would integrate Yahoo into the company, he said.
Unlike with Microsoft's Aquantive and Tellme acquisitions, Microsoft and its Live brands have a lot of overlap with Yahoo, including e-mail, portal, advertising, and search.
"Microsoft suffers in that they are conflicted over two different brands, and now they're going to have to be conflicted over three," Sullivan said. "If Microsoft wants to be a leader in search, this is a way for them to climb up and be No. 2 against Google. And it validates that Yahoo isn't a loser. It's a company that's worth a lot of money."
A merger might give Google some extra competition, but it wouldn't unseat it as the top search provider, and it would take some time to convince advertisers that they would do better on a Microsoft-Yahoo platform over Google's highly successful ad business, said Mark Mahaney of Citigroup.
"If Yahoo wants to remain independent, it will need to show investors that it is willing to take radical, value-creating steps," and outsourcing search to Google is one of its few options, Mahaney wrote in a research note.
Imran Khan of J.P. Morgan Securities thinks that regulators will approve the deal.
"Yahoo is better off inside a larger company with (a) strong balance sheet and technology," Khan wrote in a research note. A merger of Microsoft and Yahoo could give them the scale, in terms of search traffic, that they need to compete against Google and provide a boost on the ad side, he added.
"A combination of Yahoo's relationships (with DSL providers), and Microsoft's applications and devices, could create a very well positioned potential competitor," Khan wrote.
Microsoft's financial advisers are Morgan Stanley and The Blackstone Group.
CNET News.com's Mike Ricciuti contributed to this report.
See more CNET content tagged:
Yahoo! Inc.,
aQuantive Inc.,
Steve Ballmer,
shareholder,
acquisition
That is all.
The MSFT purchase of YHOO is critical to the US Cyber-Economy and United States Global Competiveness in Online Services.
It is great for genusi.com so I am biased for the deal but what is great for genusi.com is great for US Small Business.
So long as Microsoft/Yahoo allows smaller competing search engines free resources and a piece of the global search pie and does not prohibit them from profit.
Sincerely,
James Reginald Harris, jr.
we all knew big deals were in the pipe line.
Microsoft need this to fight Google and Yahoo need this to fight Google.
It all makes good business sense.
Google watch out... Yahoo are making a come back and they are gonna eat you up whole.
Apple, the Linux movement and Google are eating Microsoft alive and they know it. This just proves how desperate they are and how their Windows dominance isn't enough to keep these companies from reducing their significance as a technology leader and innovator.
Of course history, shows their true innovation contributions are, for the most part, acquired through acquisitions anyway...
I had the chance to BUY Microsoft or AOL products and they didn't appeal to me so take the hint Microsoft and AOL. I went to Yahoo to escape those two companies and now they feel they can just swoop up my patronage??? I don't think so....
Everything Microsoft touches is a flop.
MSNBC, Hotmail, Microsoft Network (Since rebranded MSN), ZUNE (with it's restrictive policies over what people can do with their own music) etc.....
Anyway if Yahoo goes forward with this, by canceling my services with Yahoo I'll save myself almost $100 a month... I'm not keeping any so called "Microsoft-Yahoo" stuff....
Also has anyone else noticed the HUGE spike in Spam on Yahoo Instant Messenger since Yahoo started to make it interoperable with Microsoft's messenger??? SPAMMERS love when two networks get together like that, because they can spam double the people in one network using a single app.
Microsoft-Yahoo? Heck it wont get my blessing or my $$$$.
Everything MS touches is a flop huh?
How about building an entire market built around open hardware...
How about windows - It may do a poor job at some things - but not everything - and the mac still is no threat.
Zune is a great product - what restrictions do you speak of? I've had two ipods and 2 Zune's- The Zune is handsdown better IMO...
Good luck with ditching it...
You have to be joking! Sure, some of Microsoft's products are better than others; no company will be able to create the #1 product in all categories. However, nobody can deny the success of Microsoft (overall).
Have fun canceling!
MS has been trying so hard to break the Google grip on the search market buying Yahoo only helps that.
To be honest Yahoo employees should be happy. Yahoo was going down, MS should have waited for the fire sale, but was probably worried Google would buy them. Yahoo offered nothing really anymore that Google or MS already have.
ATT could have bought them, to get the email and such since they use them for all of their customers. Oh well it will just be hotmail now.
Time to switch my only remaining Yahoo app to
Google...gtalk here i come.
I am going to be interested to see the stock value of Google as this plays on.
I'll bet that Google stock will go to "hold" status until the merger (if it occurs) is complete. This could take some time but both companies needed each other in a bad way. This would be such a perfect match, and a way to keep Yahoo alive.
If MS & Yahoo do what I think they are capable of then you'd better start selling your Google stock now.
One thing that could throw a wrench into the works is if MS decides to rid itself of the Yahoo name, then all bets are off.
approved by gov't regulators in the US, EU, and various Asian
governments.
Micrsofot (more specifically Steve Ballmer) is getting desperate.
MSN sucks. Vista sucks. Office 2k7 is mediocre at best. All the
buzz, growth, and future excitement comes from places like
Apple, Canonical, Google... not Microsoft.
Google is into buying radio spectrum, and its GMail service now
eclipses Hotmail for average (not spam) usage. In less than a
year, Apple now sells more smartphones in North America than
those built with Windows CE/Mobile - and Windows CE/Mobile
has been in that market for years now. In less than six years,
RedHat has gone from being a hobbyist's company, to being the
second largest server OS provider - if not the largest. Nintendo's
Wii stomped all over XBox last year in the ultimate 'comeback
kid' story.
What has Microsoft done in the past five years? Err, released a
widely-hated OS version and temporarily got the #1 slot with
that loss-leader of a game console called XBox.
Basically, Microsoft went from 'will be' to 'has been', and Ballmer
knows it. He needs something - anything - to get the buzz
going again in his favor. IMHO, I don't think this will be it, and
he'll have to settle for being #2 - again.
/P
Microsoft and Yahoo have been playing the catch-up game for the past few years. Google is always a step ahead of them: think Gmail, Google Earth/Maps, their "Docs" application, the Open Mobile platform thingy...which looks even more promising after yesterday's news regarding open access to the "C" block of the 700MHz. And Micrahoo (lol. I'm gonna coin that) is still trying to catch up with the Docs application.
So anyways, I think Google's future is very bright, and this is a momentary sale while investors make quick money in the Yahoo shares.
Me thinks that Microsoft was getting tired of playing the "gentle giant" card after showing it can at least TRY to remain competitive- but with Google (up until now) reporting astronomical growth, they are backed into a corner and are on the prowl for blood. Will this be the start of a new downward spiral for Microsoft (in terms of anti-trust suits all over again)?
This was not a merger announcement. It was an offer announcement. Made by the company making the offer. It is as much a psychological play as it is a financial one.
they haven't got a clue when it comes to search.
On the other you have Yahoo who has been in a steady decline
for years and hasn't got a clue when it comes to improving their
search.
What good will combining them do except give Microsoft the
bragging rights that they are now a distant second in search
rather than a distant fourth.
Assuming they keep the Yahoo brand. If they don't, IMO, they
won't gain a thing.
--
Thats an interesting statement considering what they are doing at the desktop market.
Microsoft will own the Internet...
It owns the Browser, Office, and the desktop OS.
Too much control, and poor quality products.
Monopoly is when you have no alternative, and the company abuses that position. Well there ARE alternatives: I use Firefox, search on Google, use Gmail...then MSN (sorry Live Messenger). There's plenty of choices out there.
Microsoft is doing a desperate move, and I don't think Yahoo is worth the $44B.
Anybody in Redmond remember that stuff that makes the computer operate? Wouldn't it be cool if it could make the computer operate better?
Yes, this is a move to become more competitve with Google. However, with the exception of the search engine Yahoo has it all over Google when it comes to the other services available.
;D nmw
ps: very good reporting here (APPLAUSE) :)
Yahoo! has a strong consumer franchise, and technically very strong search and advertising match capabilities.
Yahoo! is let down by unfriendly and inefficient processes and services for its advertisers, however, which is why it generates advertising revenues, but is not great at generating good profits.
Digital Marketing blog - YaSoft! or MicroHoo! ?
Probably 70-80% of people running Vista (that includes me) would rush out and get a really good OS. It wouldn't affect businesses right away, but it would after a while. That would be a definite blow to MS... but I'm wondering if Apple will ever be interested in owning such a large market share (I think they're like the Marines: "the few, the proud, the Apple-users"), and if the deal they have with Microsoft for Office on the Mac doesn't involve a promise from Apple NOT to bring OS X to the PCs.
I think we're in for a pretty interesting couple of years.
in regards to google. Not that I'm taking sides here, but "Monopoly"
is strictly defined and Google does not force anybody to use their
products. If a better search engine came along I'd use it.
Besides, everything Msoft does sucks. If Apple bought Yahoo it might make sense since they actually have some creativity and vision. Msoft will no doubt try to "bundle" their search with essential OS components that won't work witout it so they can shove and inferior search down your throat. Don't think they won't try it because it Did work before. With all the lawsuits and troubles, What browser is still dominant? They have plenty of lawyers to fence while they corner the search market with an OS stranglehold.
MS overpaid by a large amount for Aquantive, it hasn't done much so far for the clueless and hapless MS. If Google hadn't gone after Double Click, MS wouldn't have made this deal. It is a classic case of the pathetic "keeping up with the Joneses".
Now to keep up(yet again) with a company who really isn't in the same business as MS, they want to massively overpay for a company in decline?
This makes sense only at MS. Google is not a threat to MS, in fact they are not in the same business.
Microsoft has this pathological need to squash any successful company that is anywhere near where MS lives.
Instead of trying to pay to keep your outdated and dying model going a little bit longer, they might as well start producing innovative work that people want as opposed to the crap they have now that requires unethical and pathetic lock in schemes to keep the money flowing.
Google has many problems, but at least they are still agile, can produce products and services people actually want.
Until MS figures out they will have to work to stay on top, they will be in decline, overpaying for lame companies is not the answer.
As for this Yahoo deal- I'd wait and see what happens. Apparently investors like the deal a lot to see Yahoo's stock go up so fast. Some of that is opportunistic, but since any purchase would be a year away, that's a long time to wait to trade for profits on those stocks.
By the way, Apple is considered a successful company and MS isn't going after them or to try and squash them. MS is going after markets that they are interested in. Things change.
"they might as well start producing innovative work that people want as opposed to the crap they have now that requires unethical and pathetic lock in schemes to keep the money flowing."
Heh, that describes the iPhone exactly to a T. MS isn't the only one that does this apparently. I'd be curious to see what sorts of Apple / Google link there will be next. Apple will need to do something or be left out in the cold.
For some reason some people insist on thinking that once a company gets to a certain size that they are supposed to sort of let competition bloom. Wrong! All company officers are legally obligated to grow their companies or get fired.
For example, will they be able quickly offer single sign in for all services via Open ID?
Many small things like this done quickly can add up to benefits users will care about.
- The Othe Shoe Drops
-
by Renegade Knight
February 1, 2008 7:28 AM PST
- MS rantings about Google become null and void when MS has exactly the same aspirations.
-
Reply to this comment
-
Showing 1 of 3 pages (168 Comments)