Tuesday, 5 February 2008

Microsoft Makes $44.6B Bid for Yahoo, Google Lashes Out

Microsoft Corp. made headlines on 1st February, with its announcement to buy out Internet goliath Yahoo! for 44.6 billion dollars. In a letter to Yahoo executives, CEO of Microsoft Steve Ballmer wrote, “Microsoft's consistent....

Microsoft Corp. made headlines on 1st February, with its announcement to buy out Internet goliath Yahoo! for 44.6 billion dollars.

In a letter to Yahoo executives, CEO of Microsoft Steve Ballmer wrote, “Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers.”

Microsoft’s bid couldn’t have made a more timely entrance with Yahoo posting a rather disappointing 2007 financial report last week, revealing that it plans to cut some 1000 jobs and warned its shareholders that things may not look up until 2009. On 31st January, Yahoo also announced that that former CEO Terry Semel will be stepping down from the Chairman of the Board role.

Microsoft’s interest in combining Yahoo’s assets is seen as means to gain competitive advantage in the internet search and advertising space which is becoming increasingly dominated by Google.

Yahoo has not commented much on Microsoft’s second attempt at wanting to acquire it. Initial talks about a potential merger between both companies fell through early 2007.

The Sunnyvale, California based company has been extremely tightlipped on this matter, releasing only a short, noncommittal statement. Part of the statement reads, “The Company said that its Board of Directors will evaluate this proposal carefully and promptly in the context of Yahoo!'s strategic plans and pursue the best course of action to maximize long-term value for shareholders.”

Internet rival Google however has been anything but quiet. It released a statement early this morning referring to Microsoft’s bid as “hostile” and that it “raises troubling questions.”

“This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation,” said David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer referring to Microsoft’s reluctance in engaging in open source when it comes to its programs.

“Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services? Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers,” Drummond questioned.

Google ended its statement by saying: “We take Internet openness, choice and innovation seriously. They are the core of our culture. We believe that the interests of Internet users come first -- and should come first -- as the merits of this proposed acquisition are examined and alternatives explored.”