Microsoft Moves on Yahoo; Google Offers to 'Help' Thwart Deal

04 February 2008

REDMOND, Washington: With the finely honed instinct of a born predator, Microsoft unclenched its jaws on Friday and snapped at ailing internet portal Yahoo.

Presumably basing the timing of its attack on the belief that Yahoo's share price had reached a temporary nadir, Microsoft moved in with a $44.6 billion (€30.03bn; £22.66bn) offer that the former's stockholders will find difficult to to refuse.

The move is, of course, motivated by Microsoft's paranoia about Google and its exponentially expanding slice of the online advertising cake. 

Microsoft ceo Steve Ballmer admitted that the market for online advertising is "increasingly dominated by one player."

He continued: "We believe our combination [with Yahoo] will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."

Added Ballmer: "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."

Currently Microsoft's web portal MSN lags a dwindling third in the online ad race, behind Yahoo and numero uno Google.

Officially Google is saying nothing. But insiders let it be known to the Wall Street Journal over the weekend that the search titan's ceo Eric Schmidt has called Jerry Yang, his opposite number at Yahoo, to offer help in any effort to thwart Microsoft's move.

However, such 'help' is unlikely to result in a counter-bid which would be vigorously opposed by competition authorities both in the US and the EU.

The offer follows Yahoo's posting last Tuesday of a lackluster set of Q4 numbers, a downbeat outlook for 2008 and the shedding of around 1,000 staff.

If successful it would be the largest web-related deal since the ill-starred merger between AOL-Time Warner in 2001.

According to Citigroup analyst Mark Mahaney, merging the Yahoo/MSN advertising platforms sufficiently quickly and efficiently to stay competitive with Google would pose "considerable” challenges.

Should they fail to smoothly integrate their ad platforms, he added, Google might "actually gain more market share due to industry uncertainty over the integration of the deal."

And according to Tim Weber, business editor of the BBC News website: "It is a shotgun marriage, but the person holding the shotgun is Google."

The reaction of Yahoo's board is not yet known but the bid is likely to be welcomed by Yahoo's long-suffering shareholders.

At close of business Friday on the NYSE Microsoft closed 6.6% lower and Google shares fell 8.6%. Unsurprisingly, Yahoo's stock soared nearly 50% to end the day at $28.38.

Data sourced from multiple origins; additional content by WARC staff