Microsoft's Yahoo Offer is The Biggest Tech Bid Ever !

Microsoft offering to buy Yahoo

Yep you read right. The big M is offering to buy Yahoo in order to challenge (who else but) Google's dominance in the Internet search services and advertising. According to Bloomberg, Microsoft made a made an unsolicited USD44.6 billion offer for Yahoo! Inc and Yahoo has actually responded that they are evaluating the offer 'promptly'. A screenshot of the news on Yahoo News Considering that Google has dominated the Internet search and advertising market in the last few years, it isn't actually surprising that Microsoft would take action to stem their dominance. This offer for Yahoo however, is a bigger action taken than Microsoft than I expected. We'll keep things updated here on this ongoing development so stay tuned for more. *********************************************************************************** UPDATE 2 : about the planned merger http://www.bloomberg.com/apps/data?pid=avimage&iid=i2VYv3fh5vG4 ********************************************* Microsoft-Yahoo Linkup May Shut Google Out of Display (Update2) By Ari Levy and Elliot Blair Smith Feb. 6 (Bloomberg) -- For the first time in four years, Google Inc. is feeling the heat of potential competition in the proposed combination of Microsoft Corp. and Yahoo! Inc. Microsoft's $44.6 billion bid for Yahoo may slam another door in Google's so far unsuccessful attempt to expand beyond the four- line text advertisements that run alongside Internet search results. That's because Microsoft and Yahoo would control more than a quarter of the market for animated ads and colorful display banners at the top of Web pages. With growth slowing in the market for text ads, Google set its sights on display and multimedia ads, where total U.S. sales will jump 60 percent by 2011 to $13.7 billion, according to researcher EMarketer Inc. Google has relied on search-linked ads for almost all of its $16.5 billion in annual sales and the sixfold increase in its stock since August 2004. ``Even though Google may be looking forward and seeing this world where they own online advertising, at this point they're really only owning one flavor,'' said Jon Gibs, vice president at the research firm Nielsen Online in New York. ``They really are going to be facing quite a giant in the other part of the display ad universe.'' Google shares have tumbled 11 percent since Microsoft's unsolicited bid for Yahoo Feb. 1, to the lowest since August, on concern the combination will curb growth. Quarterly profit for the Mountain View, California-based company also trailed analysts' estimates. Microsoft said it is pursuing Yahoo to challenge Google for online ad sales, a market that may double to $80 billion worldwide by 2011. In the U.S., search ads will account for 40 percent of online promotions, compared with 33 percent for display and media spots. Analysts predict display revenue will become at least as profitable as search ads and say it's growing faster. Failed Efforts Google has been the most-used site for Web searches since January 2004, based on Nielsen data. Chief Executive Officer Eric Schmidt has failed to parlay that dominance into new markets. He tried selling ads for radio and TV commercials, and newspaper classified spots. With Yahoo slumping and Microsoft unable to jumpstart Web ad sales, it started to look as if Google might have an easy shot at up-and-coming parts of the Web: ads dished out to Internet pages shown on mobile phones and video promotions. In addition to its popular homepage, Yahoo owns the Flickr photo-sharing site and HotJobs employment site. It attracts millions of users to its finance and sports pages. Those are locations for marketers to showcase their brands. As of November, Yahoo had the biggest share of the U.S. display market with 19 percent, according to Reston, Virginia- based ComScore Inc. Microsoft was third with 6.7 percent, behind News Corp.'s Fox Interactive Media. Google had 1 percent. New Leader ``When you put Yahoo and Microsoft together, what you get is a leader in display and branded advertising,'' said Jeffrey Donlon, who helps manage $18 billion at Manning & Napier Advisors Inc. in Fairport, New York, including Microsoft and Google shares. ``Yahoo brings some interesting content assets to the table that Google does not have.'' Yahoo hasn't responded to Microsoft's offer. Stanford Group Co. analyst Clayton Moran in Boca Raton, Florida, said Yahoo may seek a partnership with Google or a media company like News Corp. Yahoo Chief Executive Officer Jerry Yang told staff in an e-mail today that the board is still examining the Microsoft bid and other ``strategic alternatives.'' Yahoo's board is carefully evaluating the Microsoft proposal, spokeswoman Tracy Schmaler said. Spokespeople Matt Furman at Google and Colleen Lacter at Microsoft declined to comment. Yahoo, in Sunnyvale, California, fell 41 cents to $28.57 at 4 p.m. New York time in Nasdaq Stock Market trading. Redmond, Washington-based Microsoft dropped 55 cents to $28.52. Google slid $5.09 to $501.71. `Troubling Questions' With display ads, Google can target Web users by placing banners and videos on other companies' sites. In some cases, marketers pay for placement and in others they pay when an ad is clicked. Google has made moves into display and multimedia ads, with the $1.65 billion acquisition of the video site YouTube Inc. in 2006. Almost a third of all U.S. online video clips are viewed on YouTube, and Google sells ads in some videos. Companies including retailer Neiman Marcus Group Inc. and TV maker Royal Philips Electronics NV have rented out the YouTube homepage for a day. Google followed by offering $3.1 billion for the display ad company DoubleClick Inc. in April, and has introduced ads with multimedia clips that show movie trailers and live news. The DoubleClick transaction is under review by European regulators. Microsoft opposes the deal, arguing it would give Google too much control of the Internet ad market. No Oxygen Microsoft's online revenue, mostly display ads, rose 38 percent to $863 million last quarter. More than 80 percent of Yahoo's $7 billion in annual sales come from online ads, and its display revenue rose 20 percent last quarter. Google doesn't give figures for the search and display ad businesses. Credit Suisse analyst Heath Terry in New York says display and YouTube will contribute a combined $323 million in sales this year, or 2 percent of revenue, and will rise to $705 million, or 3 percent, in 2009. ``They're going to steal the oxygen from where Google is trying to grow,'' said Bill Gossman, CEO of Revenue Science Inc., a New York-based provider of targeted advertising. ********************************************************************************** Microsoft may borrow money for Yahoo deal Microsoft said Monday it may borrow money for the first time in its history to fund a portion of its $44.6 billion unsolicited offer for Yahoo. Microsoft also said it expects Yahoo's board to agree to the proposed deal quickly, but Yahoo said over the weekend that it expects to take "quite a bit of time " to weigh all of its strategic options including remaining independent. A source familiar with Yahoo's strategy said it is considering a business alliance with Google to fend off Microsoft's offer. Microsoft Chief Financial Officer Chris Liddell said the software company may issue some debt to finance the cash portion of its 50-50 stock and cash offer for Yahoo, instead of drawing down its entire $21 billion cash pile. "It's likely we're actually going to borrow for the first time," Liddell said in an annual strategy meeting with analysts. "It's going to be a mixture of the cash we have on hand plus debt." Liddell declined to say whether Microsoft was already buying Yahoo stock on the open market. He also did not give any information on what form of debt Microsoft will seek in the capital markets. Microsoft made public on Friday its offer to pay Yahoo shareholders either $31 in cash or 0.9509 of a share of Microsoft common stock. The deal aims to create a formidable No. 2 to challenge Google's dominance in Web search and digital advertising. Analysts applauded Microsoft's decision to take on debt. "Microsoft can probably get a lower price of debt than equity," said Kim Caughey, senior analyst at Fort Pitt Capital Group. "I've often wondered why Microsoft sits on the pile of cash. It doesn't make a lot of financial sense." Liddell, when asked why Microsoft chose to dilute its stock instead of making an all-cash offer, said analysts need to keep the offer in perspective with the $31 billion that Microsoft spent in share buybacks and dividends in fiscal 2007. Microsoft shares fell 26 cents to $30.19 in Nasdaq trading, while Yahoo shares rose 95 cents to $29.33. At the same meeting, Microsoft Chief Executive Steve Ballmer said the offer for Yahoo was generous and he expects Yahoo's board and shareholders to agree to the buyout quickly. "We trust the Yahoo board and the Yahoo shareholders will join with us quickly in deciding to move down an integrated path," Ballmer said. According to a source familiar with Yahoo's strategy, the company is mulling a business alliance with Google to rebuff Microsoft's proposal. It has also received preliminary contacts from media, technology, telecommunications and financial companies, another source close to Yahoo said. Microsoft said combining with Yahoo would speed up the process of building a company capable of capturing 40 percent of the digital advertising market. Ballmer noted, however, that if the company was successful in its bid, it would continue to invest in building the business. "We are on a path--we were on a path and we will stay on that path regardless," Ballmer said. Redmond, Washington-based Microsoft emphasized that it expects to see strong growth from most of its business units. Liddell said he expects Microsoft's revenue to grow at a double-digit percentage in the coming fiscal year starting in July despite a potential U.S. economic slowdown. Analysts, on average, forecast Microsoft's revenue to grow 10 percent to $66.4 billion in fiscal 2009 from an estimated $60.2 billion in the current year, according to Reuters Estimates. Microsoft also said its first major update to Windows Vista was released to manufacturing. Usually, large organizations wait for the first major update before deploying a new operating system. The release, known as Service Pack 1 (SP1), will contain improvements in security, reliability and performance. SP1 will be available in mid-March through Windows update in English, French, German, Spanish and Japanese. source : CNET.com