It’s a story that continues to send shock waves through the technology world. Microsoft is vying to acquire Yahoo. Google is bent on doing everything in its power to stop it. The stage is set for a long drama.
But reality is beginning to set in.
Beyond the hype, analysts are starting to look at what it would take for Microsoft to pull off the $44.6 billion Yahoo acquisition, and noting that the price could rise even higher if a bidding war breaks out with the likes of AT&T and others who might be interested in owning a major Internet brand.
The acquisition would be Microsoft’s largest, would offer relief to Yahoo shareholders who have watched the search-engine giant’s stock struggle, and would give Google a fierce competitor for advertising. But Microsoft may have to take on some debt, may see its profits shrink, and would certainly face investigations from antitrust regulators.
Microsoft’s Acquisition Convictions
Microsoft seems more than willing to take those risks. The online advertising market is growing fast, from more than $40 billion in 2007 to nearly $80 billion projected by 2010. Today this market is increasingly dominated by one player: Google.
Microsoft could sell bonds to finance the proposed Yahoo takeover. The company’s first-ever entry into the debt market would be a certainty, Microsoft CFO Chris Liddell told analysts in New York on Monday.
Microsoft is convinced the deal is good for its shareholders. “We think it’s in our interest, in Yahoo’s interest to resolve their future as quickly as possible,” he said. “Our thinking in striking what we consider to be an attractive price was to make it as attractive as possible to move quickly.”
As Microsoft sees it, the merger would create a more efficient company with synergies in four areas: scale economics driven by audience size and increased value for…