Microsoft launches bid for Yahoo

01-02-2008

by Emmet Ryan

Microsoft has launched an audacious USD44.6 billion bid to buy Yahoo which could potentially turn the tide in its long-running battle with Google.

The Redmond-based IT giant said the cash and stock bid comes after lengthy discussions within the firm and with Yahoo's management.

"We've been engaged in conversations with Yahoo's management off and on for the past 18 months," said Microsoft chief executive Steve Ballmer in a conference call with the media on Friday. "This is a decision we have thought long and hard about. The result [of a potential takeover] will be incredibly beneficial to both advertisers and consumers."

The bid, which has long been rumoured, is being made in an effort to shake up competition in the online advertising market, and Microsoft's management did little to hide its desire to take on Google.

"Online advertising is currently worth USD40 billion," said Kevin Johnson, president of the Platforms & Services Division of Microsoft. "Today the market is dominated by one player. The industry will be better served by having a more credible alternative."

Certainly there is no love lost between Microsoft and Google. The Redmond firm has seen the young Mountain View-based upstart eat into areas that would have traditionally been considered Microsoft territory. All the while the IT giant has been lying, waiting. With this bid there can be no doubt about its intentions: the empire wants to strike back.

Adding Yahoo to its stable would instantly give Microsoft a stronger hand in the online advertising market, which Google has dominated for some time. Combining the forces of the two brands would undoubtedly give Google something to think about.

Whether it would enable Microsoft to "kill" Google is another story. This was purportedly Ballmer's aim, according to an allegation filed in Washington state court by Mark Lucovsky, a Microsoft senior engineer who left for Google back in 2005. The submission by Lucovsky also accused Ballmer of unleashing a tirade filled with swear words and throwing a chair in anger at his decision.

Given the time taken to come up with a formal bid it's fair to guess that the plan to move for Yahoo was done when Ballmer was in a calmer frame of mind than during the alleged Lucovsky incident.

As yet, it's unclear if Yahoo will bite. The offer at USD31 per share values the troubled search firm's shares at 62 percent premium on their Thursday closing price but the search firm is keeping its cards close to its chest.

In a statement Yahoo said it will evaluate the proposal carefully and promptly "in the context of Yahoo's strategic plans and pursue the best course of action to maximise long-term value for shareholders." For now though it looks as though Microsoft will have to wait to see if it will be able to reel in the search firm.