Microsoft offers US$45 bln for Yahoo

Microsoft has offered to buy Yahoo in a bid to challenge the market share of Google's on-line search business. Microsoft made an unsolicited offer to buy Yahoo for 44.6 billion US dollars in cash and stock. The merger would be the biggest internet deal since AOL's acquisition of Time Warner.

With the bid, Microsoft is seeking to join forces with Yahoo against an ever more powerful Google. Google's share of the global web search market has reached 77 percent, according to Internet audience researcher comScore. Yahoo is second with 16 percent, and Microsoft is a distant third with 3.7 percent.

software giant Microsoft Corp CEO Steve Ballmer is seen here during a press conference in Beijing, in 2006. Microsoft unveiled a hostile bid of 44.6 billion dollars for Yahoo in an effort to merge the world's biggest software company with a major Internet player to take on the Google juggernaut, onFebruary 1.(AFP/File)

In an audio webcast, Microsoft Chief Executive Steve Ballmer said the acquisition was the right move for both companies.

Steve Ballmer, CEO of Microsoft said "This is a decision we thought, and I personally thought long and hard about. And we are very, very confident that it's the right path for Microsoft and for Yahoo."

Yahoo said on Friday its board will evaluate the unsolicited bid. Yahoo has been losing market share to Google in the increasingly strategic web search market. It warned earlier this week that it faced "headwinds" in 2008, forecasting revenue below Wall Street estimates.

Microsoft's move is clearly aimed at challenging its archival, Google, which dominates the online search market. Bobby Tulsiani, a media and internet video analyst, says Microsoft is making the move because it has been unsuccessful in luring users to its site, MSN.

Bobby Tulsiani, Analyst of Jupiter Research said "They have been a laggard in search, so this is a good way to catch up. Yahoo has 20 percent search, Google has 50 percent search. Combine Microsoft, plus Yahoo and you get closer to catching up to Google. If you can't find the audience, then go buy the audience, and that's the major reason. There's a lot of other things now with Microsoft and Yahoo becoming the biggest e-mail provider, the biggest instant messenger, but primarily, this is about search."

In Brussels, Catriona Hatton, a partner at international law firm Hogan and Hartson, said the European Union anti-trust regulators will be looking carefully at the bid. Especially after Microsoft was accused of breaking competition rules in a landmark ruling by the European Court of Justice in September 2007.

Catriona Hatton, Partner of Hogan & Hartson said "I suppose the question is whether if the U.S. agencies approve this deal, whether the Commission will go the same route and if the U.S. agencies impose remedies,whether the Commission will accept the same sort of remedies or whether they will be more stringent in their review of the deal."

Microsoft offered 31 US dollars per share for Yahoo -- a 62 percent premium over the internet media company's closing stock price on Nasdaq Thursday. Yahoo's shares jumped to 30.75 US dollars in pre-market trading. And Microsoft's shares, which have a market capitalization of about 300 billion US dollars, fell 6 percent to 30.78 US dollars.

Critics of a potential merger have pointed out that Microsoft and Yahoo have very different corporate cultures and many overlapping businesses, from instant messaging to email and advertising.

The deal would be the largest in the internet market since the 182 billion US dollar purchase of Time Warner by AOL in 2001. That merger was seen as the worst marriage in recent corporate history, with clashing corporate cultures and many of the promised synergies never materializing.