Microsoft to buy Yahoo, Proposed acquisition deal $44.6 Billion, $31 per share.
Today Microsoft Proposed Acquisition to Buy Yahoo Inc. for $44.6 Billion at $31 per Share, Over 62% of the Actual Yahoo Stock Price.
Here is the official statement from Microsoft:
January 31, 2008
Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Attention: Roy Bostock, Chairman
Attention: Jerry Yang, Chief Executive Officer
Dear Members of the Board:
I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft’s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock. Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition.
Our proposal represents a 62% premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.
Danny Sullivan of Search Engine Land did live coverage of the Microsoft conference call.
Here is the most important point:
- CEO Steve Ballmer stated that the acquisition has been in talks for over 18 months.
Comment by Search Engine Land:
"The discussion and tone on the call made it sound like the deal was farther along than it actually is. The bid is unsolicited and Microsoft acknowledged that other companies may enter the negotiation. However, Microsoft’s general counsel Brad Smith opined that Google would not be one of them because "it controls 75 percent of search" worldwide and anti-trust regulations would preclude Google from bidding. That had the sound of a very calculated chess move."
Rest of the conversation about Microsoft purchase of Yahoo is official corporate speak.
Microsoft to buy Yahoo continued.
Official Line from Yahoo on acquisition.
"Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today said that it has received an unsolicited proposal from Microsoft to acquire the Company. 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."
If the deal goes through - it will be the largest acquisition in Microsoft’s history.
There wasn’t a better time for Microsoft buy Yahoo Inc.
Washington Post
Wednesday, January 30, 2008
"Yahoo also said it would lay off 1,000 of its 14,300 employees starting in February. By restructuring, it hopes to return to growth in 2009, Yang said in a conference call.…
"…Search market share for Yahoo fell to 17 percent from 21 percent over the year, according to research firm ComScore…"
"Shares of Yahoo closed up 3 cents yesterday(JAN 29), at $20.81 a share. The company announced its results after the market closed."
Yahoo’s loss is Microsoft’s gain. Microsoft is willing to pay $31per share 62% over its price.
Microsoft is hoping to buy Yahoo to compete more efficiently with Google, which is eating up both search engines. We cannot say if the deal will go through, but considering recent Yahoo’s hardship and tempting 62%+ offer, Yahoo’s board faces some tough decisions.
Desperate attempt by Microsoft.
MSN a Live.com mak up about 7% of search share. The new launch of Live Search had failed and only holds around 1.5% with the rest going to MSN Portal.
This shows how desperate Microsoft is to stay in search game. It is projected that search revenues will rise 40% in not so far future, making Google more formidable competitor to Microsoft. Google teamed up with Apple and open source to take down or at least move Microsoft. It’s been long clear that MSN and live.com aren’t close to Google’s quality and do not pose formidable threat in terms of search. Microsoft is looking to fix that and does what it best can with its unlimited pockets - acquisitions. It wants to buy Yahoo! to compete with Google.
If acquired, search would be a one on one battle - Google vs Microsoft.
Microsoft to buy Yahoo, more on the topic.
Yahoo and Microsoft Merger. The Approach?
"Yahoo has portal features; so does MSN. Does Yahoo Mail go away in place of Hotmail (ahem, I mean Windows Live Hotmail). Is it Yahoo Videos or MSN Videos? Yahoo News or MSN News. At least Flickr will probably maintain its brand. Some people simply won’t want even a brand change from what works. And doing that change or any change potentially causes them to look at other options — say Google? Ironically, the consolidation — if not handled right — could deliver Google more portal customers than it may have ever hoped for in the short term."
If its a go, Microsoft will face some tough challenges.
Many Products are in direct completion with each other.
- Yahoo News - Microsoft News
- Yahoo Maps - Live Maps
- Yahoo Messenger - MSN Messenger
The list goes a lot further. As quoted above, if Microsoft decides to merge brands or change some of them - it is going to lose customers. Where do they go? Google.
How Would Search Look if The Deal Went Through?
"Yahoo is largely a duplicative acquisition, if it happens. Pick an area, Microsoft probably already has that feature or service. That means a hard choice of whether you keep running two, something that Yahoo itself has gone against as it has dropped its own duplicated services (Flickr over Yahoo Photos, for example). Alternatively, you go with one and risk alienating both users and generating internal strife, with the upside that perhaps you win new user.
A daring change might be to strip Yahoo of its portal look, making it more like the "pure search" Yahoo page here http://search.yahoo.com/ and migrate Yahoo’s portal folks over to MSN. It would be risky. It might capture the attention of those seriously seeking a Google alternative, but it might risk angering existing Yahoo people."
It would be a very foolish move on Microsoft’s part to change anything or merge with Yahoo. The approach must be at the nanolevel, crawl by crawl, step by step like baby’s first walk. There isn’t room for error. Google is only happy to get new customers.
The battle of 2 of titans
Search is growing at rapid pace. Where do you go to find a local shop? Service? Where do you go to look for product reviews? To get some gift ideas? To research a project? To research a topic? To compare prices? To look for vacation packages? To look pictures? For vides? Information?
Search has become part of our lives and Microsoft is loosing it big time. Google has been steadily capturing new users, from MSN, Yahoo and other search engines. It’s steps are coldly calculated, like a trained assassin, Google slowly closes to point blank range and Microsoft is nervous about it. It’s wets it pants every year when statistics about more search loses rolls in.
Yahoo buy out is the only thing that can make Microsoft competitive on the search market. The fact is, MSN and live.com are years behind Google’s quality. People love Google, because they get what they search for, every time. No strings attached. This is the motto and Microsoft cannot live up to it.
A year ago Microsoft signed a deal with multinational corporations to make live.com default search engines on their browsers. It paid millions. What happened to innovation?
What happens to people when search for dentist in Calgary and gets pages which aren’t even from Calgary? When the businesses spends thousands trying to optimize and their business get buried?
Yes, there must be room for ad dollars. You must allow non - related sites on top to get those PPC clicks, but when the search is irrelevant how can you expect pay per click to work?
We know that search engines have strategies in place, to get most PPC, but never at the cost of quality. Yes, people will find what they want, they wont make that 10$ per click, but guess where they gonna come back? What is small business owner going to optimize for? Where will that mom search?
Google Got That Touch
Microsoft and Yahoo Can’t Match
It’s got bright blood, working for one of the best companies, passionate and swirling with ideas and the will to propel. It is the drive that moves Google. It is the 20% time to work on the projects, the environment and simply the overall sprit. I can feel it from here. The motivation to be the best. No matter what Microsoft does now they will not beat Google unless they buy…
….Google Inc.
Will keep more updates on the Microsoft’s buyout of Yahoo.
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