Sunday, February 03, 2008

Microsoft-Yahoo! Merger?

Sources: Bloomberg, Silicon Valley Insider

Software giant Microsoft has placed a $44.6 billion hostile takeover bid for Yahoo! Inc. Yahoo! is one of the busiest web portals in the world, and would be a business boon for Microsoft who is keen to enter into the web market. A successful takeover of Yahoo! would quadruple the online advertising revenue for Microsoft. Microsoft’s MSN portal is far behind in terms of revenue and usage to the industry leaders Google and Yahoo. The market adjusted to the news of the takeover, as Yahoo gained nearly 48%, while Microsoft dropped 6%. Industry leader Google dropped 8.6% on the news.

While the most recent bid to purchase Yahoo! was unsolicited, Microsoft had privately made offers to purchase Yahoo! earlier. After being refused by Yahoo! CEO Jerry Yang, Microsoft went public. According to insiders, Microsoft “told Yahoo! execs that they had two days to respond [to the offer] or Microsoft would go public.” Yahoo refused the offer, and Microsoft made the hostile takeover bid. CEO Yang is now rumored to look sell Yahoo! to any bidder other than Microsoft.

Question: Can a Microsoft-Yahoo! merger unseat the industry leader Google?

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