According to Bloomberg.com, Microsoft announced today that they have made a $44.6 billion takeover bid for Yahoo, Inc. Microsoft CEO Steve Ballmer, who took the helm from co-founder Bill Gates in 2000, is attempting to compete more successfully with search engine giant Google, Inc. By 2010, the market is expected to grow to $80 billion, up from the current figure of $40 billion.
Yahoo has unsuccessfully tried to compete with Google, yet has suffered declining profits for two straight years. This week has been particularly bad for the company as they reported a 23 percent drop in fourth-quarter profits. This prompted the company to announce their intentions to cut 1,000 of their 14,000 strong workforce. Microsoft’s offer may just be news investors were looking for as Yahoo shares were sent climbing on the NASDAQ Stock Exchange.
On the other hand, Microsoft investors are less than pleased with the proposed deal. Their shares fell slightly over seven percent in afternoon trading. Many see this deal as an unwise move as the price is very steep. Although Yahoo shares closed just above $19 on Thursday, the deal would pay $31 per share.
Google users accounted for approximately 56 percent of search engine queries in the United States for the month of December. Yahoo and Microsoft garnered just 18 percent and 13 percent respectively. Even if the deal were completed, the combined market shared would be far less than Google’s.
Although Yahoo stated that they would take an immediate and thorough look at the offer, the deal is far from being complete. Microsoft has long been targeted by antitrust regulators in the U.S. and Europe. According to CNNMoney.com, the U.S. Justice Department has stated that it would take a close look at the antitrust implications.
Microsoft has been subject to antitrust oversight since it reached a deal with federal and state authorities back in 2002. This agreement was due to expire in November 2007, but according to ConsumerAffairs.com, the state of New York requested continued oversight of the company’s conduct. Although Microsoft and The U.S. Department of Justice’s Antitrust Division both opposed the measure, U.S. District Judge Colleen Kollar-Kotelly granted an extension until November 12, 2009.
Although it’s a steep price to pay, the deal would help Microsoft gain additional advertising revenue. The move would also help the company deliver some of its main software products in the future. However, it will take many years for the two company to integrate successfully.
Ari Levy, Dina Bass, “Microsoft Offers to Buy Yahoo for $44.6 Billion”, Bloomberg
Corey Boles, “Any Microsoft-Yahoo Deal To Face Scrutiny By US,EU Regulators”, CNN Money
Truman Lewis, “Judge Extends Microsoft Anti-Trust Oversight”, Consumer Affairs