Microsoft Bids 44.6 Billion in Cash and Stock to Buy Yahoo!

Here is the press release announcing a half cash / half stock offer.

Microsoft Corp. today announced that it has made a proposal to the Yahoo! Inc. 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.

Juicy bits from the press release, which contained a letter to the board of Yahoo!

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that "now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction." According to that letter, the principal reason for this view was the Yahoo! Board's confidence in the "potential upside" if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.

and why Microsoft feels the deal makes sense

While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

  • Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.
  • Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.
  • Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.
  • Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.
Published: February 1, 2008 by Aaron Wall in stock market


February 1, 2008 - 7:32am

Bye bye Yahoo.

But why did you give up so easily? All that money and no willpower. What destroyed you? Lack of imagination? Too many drones taken on board? Too greedy, putting yourself first and your customers last?

It's been a LOOONG decline.

February 1, 2008 - 7:38am

Wow. Biggest news I've heard in a while. Quite a premium over the $19 sale price too.

Deal does make sense.

February 1, 2008 - 7:53am

I can't believe this. But certainly, it looks like Microsoft is the only company with the managerial capacity to face Google.

February 1, 2008 - 9:03am

That is great finally some competition.

February 1, 2008 - 9:14am

Finally! This is great news to help keep Google in check. What will be really interesting to see is how this affects Google's behavior in the next few months...

February 1, 2008 - 9:44am

This is good news that comes on the day that Google's profits were disappointingly low. It would be good to see some serious search engine competition from now on - good for everyone except Google.

February 1, 2008 - 9:57am

Unbeleivable really! Its a lot of money!! I wrote a bit about the post acquisition integration stuff and possible job losses which may well ensue here.

Sam I Am
February 1, 2008 - 10:19am

Great news! Not in the least because I picked up some yahoo stock 3 weeks ago :) This is also especially good news from an SEO point of view. Yahoo has a better search engine than Microsoft and together with the acquisition of Fast last month it will almost certainly start to be a pretty decent alternative for a lot of searchers. It's also one less engine to check your rankings in :)

Last but not least, I'm looking forward to Google getting some real competition on all fronts. Microsoft kick starting a real adwords/adsense competitor is going to be welcome news. I'm really liking the moves Microsoft is taking of late!!

February 1, 2008 - 10:26am

I actually think Yahoo's search is worse than Microsoft's Live Search.

February 4, 2008 - 12:34am
February 4, 2008 - 12:43am

I wrote about that but decided to unpublish it. I think Google seems a bit hypocritical on that blog post though!

February 7, 2008 - 10:16am

I really think this could be for the better.

I am beginning to feel about Google the way people used to feel about Microsoft - The tyrannic huge corporation trying to suck people into their network.

That is actually a good description of Yahoo though..

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