The rumors are reality.
On Friday, Microsoft revealed it has made a $44.6 billion offer for Yahoo. Microsoft’s offer equals $31 a share, a 62 percent premium to Yahoo’s closing stock price on Thursday, with half cash and half Microsoft common stock.
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. Yahoo officials could not immediately be reached for comment on the offer, which came in the form of a letter to Yahoo’s board of directors.
“We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” Microsoft CEO Steve Ballmer said. “We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”
The Advertising Game
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.
“The combination of these two great teams would enable us to jointly deliver a broad range of new experiences to our customers that neither of us would have achieved on our own,” said Ray Ozzie, chief software architect at Microsoft. This combination has been rumored for some time, and Microsoft talked with Yahoo last year about alliances or a merger. But Yahoo declined to be acquired. This year, the response may be different.
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 advertisers; combined engineering talent to accelerate innovation; operational efficiencies by eliminating redundant costs; and innovation in…