Offers $44.6B for Yahoo.com
Microsoft Offers $44.6B for Yahoo
Friday February 1, 10:40 am ET
By Michael Liedtke, AP Business Writer
Microsoft Makes Unexpected $44.6B Bid for Yahoo; Internet Icon Is
SAN FRANCISCO (AP) -- Microsoft Corp. has pounced on slumping Internet
icon Yahoo Inc. with an unsolicited takeover offer of $44.6 billion
in its boldest bid yet to challenge Google Inc.'s dominance of the
lucrative online search and advertising markets. The Justice Department
says it is interested in reviewing antitrust issues associated with
The surprise offer of $31 per share, made late Thursday and announced
Friday, seizes on Yahoo's weakness while Microsoft tries to muscle
up in a high-stakes battle with Google likely to define the technology
landscape for years to come.
In a statement Friday, Yahoo said it will "carefully and promptly"
study Microsoft's bid.
With its profits steadily sliding, Yahoo's stock slipped to a four-year
low earlier this week and a new management team has been trying
to steer a turnaround but sees more turbulence through 2008.
The announcement lifted Yahoo's share price by almost 50 percent
in morning trading, while Google fell almost 8 percent, dragged
down by a fourth-quarter earnings report that missed Wall Street
In conference call Friday morning, Microsoft Chief Executive Steve
Ballmer indicated he won't take no for an answer after Yahoo rebuffed
takeover overtures a year ago.
"This is a decision we have -- and I have -- thought long
and hard about," Ballmer said. "We are confident it's
the right path for Microsoft and Yahoo."
To underscore its resolve, Microsoft is offering a 62 percent premium
to Yahoo's closing stock price Thursday. If the deal is consummated,
it would be by far the largest acquisition in Microsoft's history,
eclipsing last year's $6 billion purchase of online ad service aQuantive.
Since reaching a 52-week high of $34.08 in October, Yahoo shares
have fallen 46 percent. Yahoo climbed $9.41 a share, or 49 percent,
to $28.59 in morning trading. Microsoft shares fell $1.43, or 4.4
percent, to $31.17.
Microsoft publicly disclosed its cash-and-stock offer in hopes
of rallying support from Yahoo's shareholders, making it more difficult
for Yahoo's board to turn down the bid.
In a letter released Friday, Ballmer pointedly noted Yahoo's financial
performance has deteriorated since Microsoft was spurned a year
ago. At that time, Ballmer said he was told Yahoo believed it was
better off on its own.
"A year has gone by, and the competitive situation has not
improved," Ballmer wrote in his letter.
Microsoft's previous offer was rebuffed by Terry Semel, who stepped
aside last year as chief executive under shareholder pressure.
Microsoft sent its latest takeover offer to Yahoo late Thursday,
shortly after Semel resigned as the company's chairman. The letter
is addressed to Semel's successors, new Chairman Roy Bostock and
the current CEO, co-founder Jerry Yang, who is one of Yahoo's largest
In a prepared statement, Yahoo said 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."
Microsoft views Yahoo as its best chance to thwart Google, which
has leveraged its leadership in Internet search and advertising
to emerge as an increasingly serious threat to the world's largest
software maker's persuasive influence on how people interact with
Google already controls nearly 60 percent of the U.S. search market,
and has been widening its lead, despite concerted efforts by both
second-place Yahoo and third-place Microsoft. By combining, Microsoft
and Yahoo would have a 33 percent share of the U.S. search market,
according to the latest data from comScore Media Metrix.
By joining forces, Microsoft and Yahoo also would widen their narrowing
advantage over Google in providing free e-mail accounts -- a service
that helps foster more loyalty with users and create more advertising
Advertisers around the world are expected to double their spending
on the Internet during the next three years as more people get their
news and entertainment on the Web instead of television, radio,
newspapers and magazine. The trend is expected to create an $80
billion online ad market in 2010, up from an estimated $40 billion
Despite an aggressive push in recent years, Microsoft's online
advertising expansion hasn't paid off. Last week, the Redmond, Wash.-based
company reported a 79 percent jump in its overall profit, but its
online division's loss widened to $245 million.
And Yahoo has been struggling to attract more advertising even
though its Web site attracts one of the biggest audiences. The Sunnyvale-based
company's profit has declined for five consecutive quarters, prompting
plans to cut 1,000 jobs later this month, a 7 percent reduction
of its 14,300-employee work force.
Besides helping to boost its online ad revenue, Microsoft believes
it could mine more profit from Yahoo by jettisoning workers and
eliminating overlapping operations.
Microsoft said it sees at least $1 billion in cost savings if it
buys Yahoo. Microsoft executives deflected questions about how many
jobs might be lost, but the company emphasized retention packages
will be offered to Yahoo engineers and other key employees, including
The fate of Yahoo's brand also is unclear if Microsoft takes over.
Both Ballmer and Kevin Johnson, president of Microsoft's platforms
and services division, hailed Yahoo's strong brand value but didn't
commit to keeping the name alive.
AP Business Writer Jennifer Malloy in New York and AP Business
Writer Jessica Mintz in Seattle contributed to this story.