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Microsoft has made an offer to buy Yahoo with an unsolicited takeover offer of $44.6 billion. The surprise offer of $31 per share, was made late Thursday and announced Friday. In a statement Friday, Yahoo said it will “carefully and promptly” study Microsoft’s bid.

“Today, the market is increasingly dominated by one player, who is consolidating its dominance through acquisition,” Microsoft said. “Together, Microsoft and Yahoo can offer a credible alternative.”

“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 in a statement.

The move would be by far the largest acquisition ever for Microsoft. Its largest prior deal, also in the online-advertising space, was last year’s $6 billion deal to acquire Aquantive.

The online advertising market is $40 billion globally now and is expected to grow at least 20 percent each year for the next few years, said Kevin Johnson, Microsoft’s platform and services unit head. Yahoo has a worldwide audience of about 500 million users. The U.S. market for online ads — $21.4 billion in 2007 — eclipsed the $20.5 billion radio advertising spending for the first time, says research group eMarketer. It expects domestic online ad spending to double to $42 billion by 2011.

Last year there were 838 media mergers with a combined value of nearly $110.0 billion, up 32% and 79%, respectively, from 2006. The online media and marketing services sectors led the charge in 2007 with a combined 555 transactions valued at $43.0 billion.

With its profits steadily sliding, Yahoo’s stock slipped to a four-year low earlier this week and a new management team has been trying to steer a turnaround but sees more turbulence through 2008. The announcement sent Yahoo’s share price up 60 percent in premarket trading, while Google fell 8 percent, weighted down by a fourth-quarter earnings report that missed Wall Street expectations.

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