Microsoft Makes $44.6 Billion Bid for Yahoo

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Foxrac

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CNBC.com

Microsoft said Friday it offered to buy Internet media giant Yahoo for $44.6 billion in stock and cash, in an attempt to boost Microsoft's presence in the online services market.

Both Microsoft and Yahoo have been struggling to compete with Google, and have fallen behind in the race for online advertising dollars.

Microsoft [MSFT 32.6 --- UNCH ] said it plans to pay $31 a share -- payable in the form of $31 in cash or 0.9509 of a Microsoft share -- in the hostile deal, which represents a 62 percent premium on Yahoo's closing price on January 31.

Yahoo [YHOO 19.18 --- UNCH ] shares soared 54 percent in premarket trading, while Google shares tumbled 8 precent. News of the deal also was giving a boost to many technology stocks.

"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 Chief Executive Steve Ballmer said in a statement announcing its plans.

Microsoft said it had previously discussed a number of alternatives with Yahoo, ranging from commercial partnerships to a merger proposal, which was rejected.

"While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing," Microsoft said in a letter to Yahoo shareholders.

A deal with Microsoft would be a great outcome for Yahoo shareholders, who have grown increasingly frustrated with Yahoo's stock performance, according to RBC Capital Markets analyst Jordan Rohan. He expects Yahoo founders and insiders to support the deal.

"This is a no brainer for Yahoo shareholders," Rohan said in an interview on "Squawk Box." "The company has floundered and this is a great way to save face."

Yahoo management "can try to get a dollar or two more," but "at the end of the day, I've talked to many of the largest shareholders of Yahoo in the past few days -- there's no patience there anymore," Rohan said.

Microsoft said it estimates it could realize $1 billion in cost savings from the merger.

Rohan expects Microsoft could realize as much as $2 billion a year in free cash flow from the deal said. He anticipates Microsoft will merge back-end businesses, but keep both the Yahoo and MSN brands.

Microsoft said it expects to offer significant retention packages to Yahoo engineers, key leaders and employees. The company expects it could receive regulatory clearance and close the deal in the second half of 2008.

With its deep pockets, Microsoft is heading into the hostile offer well-armed.

The deal demonstrates the power of cash, said David Kotok, chairman and chief investment officer at Cumberland Advisors, in an interview on "Squawk Box."

Kotok also said the deal is bullish for the tech sector.

"It says the world is not coming to an end, and the people who shorted Yahoo are going to pay," Kotok added. "...It tells you that the tech sector's viable. Tech is not just semiconductors. It's very broad. It includes software, big software companies like Microsoft, and all the various types of specialty services. Yahoo's a great example. This is a very good move."
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Microsoft Makes $44.6 Billion Bid for Yahoo - Mergers and Aquisitions * US * News * Story - MSNBC.com

Wow, it's so scary, MS is trying to takeover the other companies. :eek3:

I don't use Yahoo for very long time, I always use Google at all time.
 
I use yahoo often for weather, mail and news. I have know most deaf are use yahoo for chat. Sooo.....

However I am more concern that staff of Yahoo! would be great amount of layoff.
 
PowerON said:
I use yahoo often for weather, mail and news. I have know most deaf are use yahoo for chat. Sooo.....

However I am more concern that staff of Yahoo! would be great amount of layoff.
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After Yahoo is bought by MS then MS would make Yahoo to be incompatible with Safari for Mac, iPod Touch and iPhone, right now, Yahoo is work so great on all 3 of them. It does happen to hotmail, it used to work on Safari before but not anymore and made me to use on Firefox, it still don't work so flawlessly since it's very flawlessly on IE. I'm concern about MS would make mess up with Yahoo and left other browser than IE to be not work so good. It does same with other Yahoo's own companies, such as Flickr too.

I quit to use hotmail after started not work on Safari anymore, plus virtual earth is used to work with Safari but not anymore, I only got trouble with log in and cannot load it. I had use firefox for hotmail or other MS .NET.

I feel that MS will going to great amount of laying employees off after bought Yahoo.
 
Pacman said:
After Yahoo is bought by MS then MS would make Yahoo to be incompatible with Safari for Mac, iPod Touch and iPhone, right now, Yahoo is work so great on all 3 of them. It does happen to hotmail, it used to work on Safari before but not anymore and made me to use on Firefox, it still don't work so flawlessly since it's very flawlessly on IE. I'm concern about MS would make mess up with Yahoo and left other browser than IE to be not work so good. It does same with other Yahoo's own companies, such as Flickr too.

I quit to use hotmail after started not work on Safari anymore, plus virtual earth is used to work with Safari but not anymore, I only got trouble with log in and cannot load it. I had use firefox for hotmail or other MS .NET.

I feel that MS will going to great amount of laying employees off after bought Yahoo.
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before MS, Yahoo IM for Mac is still suck. it keep crash. and yet, it's still on beta. argh.
 
PowerON said:
before MS, Yahoo IM for Mac is still suck. it keep crash. and yet, it's still on beta. argh.
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Same with MSN, I don't like MSN on Mac version, I just better off to use Adium.
 
DailyTech - Microsoft May Borrow For Yahoo Deal, Talks Still Heating Up

Look at Steve's emotion, ugh at him.
7165_ballmer2.jpg
 
My friend told me that Google is suing Microsoft for going to take away Yahoo from Google. They wanted to some business with Yahoo, if Microsoft takes over and Google will get cut off from Yahoo.
 
I didn't hear anything about that lawsuit, and I think it's unlikely..... it's nothing personal among the companies, just business. However this bid may very well backfire on Microsoft...... their (Microsoft's) market value dropped over $40 billion since this takeover bid. Meaning their own stock dropped enough that they would have needed to make the purchase.... ah let me google the story, it was yesterday I read it..


SAN FRANCISCO — Microsoft Corp. views its proposed takeover of Yahoo Inc. as the missing piece in its Internet advertising puzzle, but skeptics think the deal could become a jumbled mess that will help make rival Google Inc. even stronger.
The second-guessing about Microsoft's unsolicited bid, initially valued at $44.6 billion, is typical for large acquisitions. Investors are debating whether the benefits outweigh the potential management distractions, sagging employee morale and other headaches that can arise after the deal is done.

But the dynamics of the rapidly evolving Internet and sheer size of this deal have magnified the worries about a Yahoo acquisition backfiring on Redmond, Wash.-based Microsoft.

The investor backlash during the past week has reduced Microsoft's market value by more than $40 billion, an amount roughly equal to the current value of its bid for Yahoo.
"Whenever you see something like that, you have to wonder if something is wrong," said Anant Sundaram, a professor of finance at Dartmouth College's Tuck School of Business.

If Microsoft winds up in a lengthy antitrust battle to seal the deal or runs into trouble cobbling together the disparate pieces, analysts say Google will likely be able to widen its already formidable leads in the Internet's lucrative search and advertising markets.

"There is going to be a lot of red tape, bureaucracy and (cost cutting), so one would think there could be long wait before we see any benefits to this deal," said Cantor Fitzgerald analyst Derek Brown. "While all that is going on, Google will be stepping on the accelerator."
Google seems intent on trying to prolong the antitrust review if Yahoo and its shareholders accept Microsoft's offer. The Mountain View-based company already is lobbying regulators around the world to take a hard look a Microsoft-Yahoo combination.

A Congressional committee had been scheduled to discuss the proposed deal Friday, but the hearing was postponed late Thursday. Meanwhile, a prominent technology blog has reported that Google may be buying Bebo.com, a popular online hangout, for more than $1 billion. The rumor was posted by TechCrunch, which in 2006 reported Google's plans to buy online video pioneer YouTube just days before that acquisition was announced. Google declined to comment Thursday.

Wall Street's misgivings about Microsoft's bold gamble have contributed to a 14 percent decline in its stock price since it was announced last week. On the flip side, the bid has lifted Yahoo's previously sagging stock by 51 percent.

Microsoft's drop has been far worse than the 3 percent decline in the Dow Jones Industrial average, which includes Microsoft as one of its components.

Microsoft's confidence in the Yahoo takeover is reflected in the price it's willing to pay — about 15 percent of its market value — for what would be the biggest acquisition in its 33-year history.

"Obviously if I didn't think this was a good investment, a good acquisition financially for the company ... we wouldn't do it," Steve Ballmer, Microsoft's chief executive, told the company's employees shortly after announcing the Yahoo offer.

Microsoft believes it could start making money from the Yahoo acquisition within two years. Many analysts agree that bidding for one of the Internet's best-known brands and biggest audiences makes sense, especially after Yahoo's declining profits caused its stock price to fall more than 40 percent in the three months leading up to the offer.

"We believe strategically this is the correct move for Microsoft as they continue to build ... a viable competitor to Google and gain mind share in their advertising platform," RBC Capital Markets analyst Robert Breza wrote in a research note earlier this week.

But other analysts wonder if Microsoft is paying too much for a company that's lost its luster as young Web surfers migrate from all-purpose Web sites like Yahoo to online social networks like News Corp.'s MySpace.com and Facebook.com.


"It seems to me that Microsoft should be chasing Google by looking down the road and figuring out what the next big thing will be rather than be looking in the rearview mirror and buying the last big thing," said Cowen and Company analyst Walter Pritchard.

Microsoft last year paid $240 million for a 1.6 percent stake in Palo Alto-based Facebook to grab a piece of the booming social networking market.

Pritchard thinks Microsoft would be better off foregoing the Yahoo acquisition and spending considerably less to acquire privately held LinkedIn, a fast-growing professional networking service that would have fit nicely with Microsoft's Outlook program.

The poor track record of past high-tech acquisitions also has added to the doubts. The long list of flops is topped by America Online's acquisition of Time Warner Inc. eight years ago, a deal that still haunts both companies.

Another major software maker, Oracle Corp., has proven some tech deals can pay off, having spent more than $25 billion to buy dozens of its smaller rivals during the past three years. Oracle's profits have been on the upswing during that span, lifting its stock price about 40 percent.

It's unlikely Oracle CEO Larry Ellison will offer any insights to Microsoft, however, given his utter disdain for his longtime rival.

The hand-wringing about Microsoft's bid for Yahoo assumes the offer will be accepted, and that outcome remains uncertain.

Yahoo's board has spent the last week examining alternatives, an exhaustive process the company has indicated could drag on. If Yahoo spurns the initial $31-per-share offer, some analysts think Microsoft will sweeten its bid to as much as $35 per share.
 
Looks like the deal won't happen. I'm sick of Microsoft buying out too many companies, can't they just leave them alone! It's company eat company world! So many companies are buying out other companies, it sucks.
 
I'd be happy if they bought out my company!! LOL! It's one of those "glass is half empty or half full" situations, and really depends on what side of the table you are sitting on I guess
 
^^ Yes, I get the picture what you're talking about. It means the rich and poor gap is widening and the average worker income hasn't changed much while rich people get richer.
 
Mircosoft is filthy rich and if they buy yahoo off them, what's left for us, then?
 
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