Microsoft Makes Major Bid For Yahoo
$44.6 Billion Offer Comes As Search Engine Giant Prepares For Layoffs
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Microsoft bid $31 per share for Yahoo, representing a 62 percent premium to Yahoo's closing stock price Thursday.
"We see this announcement as the company’s next major milestone to embrace online services," Steve Ballmer, Microsoft's chief executive officer, said on a conference call this morning.
The unexpected announcement Friday comes as Yahoo and Microsoft have fallen behind Google in the race to capture online advertising dollars. The deal could also give lift to the entire technology market.
"The Windows experience needs to increasingly embrace the Internet," Ballmer said. "When you combine the strengths of our two companies, the results will be very competitive."
Microsoft officials noted that Google, which has about 75 percent worldwide market share in the online search business, is prevented by antitrust laws from acquiring Yahoo itself, and that the online advertising industry - which today stands at more than $40 billion - is forecast to reach $80 billion in the next three years.
"Today the market in increasingly dominated by one player," said Kevin Johnson, president of Microsoft's Platforms & Services Division. "By combining assets of Microsoft and Yahoo, the industry will be better served."
"Microsoft didn't leave any doubt that one of the reasons for the acquisition is to better compete with Google," said CBS News technology analyst Larry Magid. "Yahoo has been struggling lately and Microsoft has never had a dominant online product. Perhaps by combining forces, they can give Google the competition that it now lacks."
If the deal goes through, analysts expect scrutiny from Congress, Justice and other enforcement agencies, but they say any concerns about search engine or online advertising market power may not be significant enough to stop the transaction.
The Justice Department on Friday said it is "interested" in reviewing antitrust issues associated with Microsoft's bid.
"The antitrust division would be interested in looking at the competitive effects of the transaction," said Justice Department spokeswoman Gina Talamona. [See more on anti-trust issues below]
In a letter to Yahoo's board of directors, Ballmer said the world's biggest software company had been told a year ago that the Yahoo board felt it was not the right time to enter into discussions regarding a deal.
"According to that letter, the principal reason for this view was the Yahoo board's confidence in the 'potential upside' if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment."
"A year has gone by, and the competitive situation has not improved," Ballmer added.
Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock.
Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.
Ballmer said Microsoft expects Yahoo's board will review its proposal, but "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal."
Ray Ozzie, Microsoft's chief software architect, said joining the R&D capabilities of the two companies together would bring "a broad range of experience to our customers that neither could have achieved on our own."
The company is targeting the second half of calendar year 2008 for a close to the transaction.
Shares of Yahoo added $8.67, or 45 percent, to $27.85 in morning trading, while Microsoft fell $1.88, or 5.8 percent, to $30.72.
The announcement follows word on Thursday that Terry Semel stepped down as Yahoo's chairman, severing his ties 7-1/2 months after he resigned as chief executive under shareholder pressure. He had been criticized for failing to cash in on the Web advertising surge as effectively as main rival Google Inc.
Yahoo Inc.'s financial funk deepened at the end of 2007, prompting the slumping Internet icon to draw up plans to lay off as many as 1,000 workers.
The Sunnyvale, Calif.-based company disclosed the upcoming 7 percent reduction in its 14,300-employee work force Tuesday while reviewing a 23 percent drop in fourth-quarter profit and a cautious 2008 outlook. The bad news sent Yahoo shares skidding to their lowest levels in more than four years.
This is certainly coming at a good time for Yahoo. $44.6 billion has got to be looking pretty good right now.
Larry Magid,CBS News technology analyst
"This is certainly coming at a good time for Yahoo," said Magid. "$44.6 billion has got to be looking pretty good right now."
While there were few specifics about what the merger would mean for each company's employees and shareholders, Microsoft officials proclaimed the deal would be good for both camps, though there was the intimation that its integration plan necessitated the "right amount of head count."
Yahoo shares dropped $2.09, or more than 10 percent, in extended trading Tuesday after finishing the regular session at $20.81, up 3 cents. The company's market value has plunged more than 50 percent since the end of 2005, wiping out $35 billion in shareholder wealth.
Yang, Yahoo's co-founder, took over as CEO seven months ago in an attempt to shake things up, but his overhaul hasn't impressed Wall Street so far. The mass firings represent Yang's most dramatic move yet.
Meanwhile, Microsoft last week forecast a rosy 2008 - despite broader economic worries - after it blew by Wall Street's expectations for a second consecutive quarter.
Experts Expect Government Approval
Keith Hylton, a professor of antitrust law at Boston University, said Google's success in online search and advertising means a combined Microsoft-Yahoo would have significant competition.
"The fact that Google dominates this business will be a big factor in their (Microsoft's) favor in trying to get this approved by the regulators," Hylton said.
A spokesman from the Federal Trade Commission, which in December approved Google Inc.'s $3.1 billion purchase of online advertising company DoubleClick Inc., declined to comment. That deal still faces antitrust scrutiny in Europe.
A federal judge this week extended by 18 months court oversight of Microsoft's market power, which began in 2002 after a landmark antitrust settlement. Hylton said Justice has been relatively lenient with Microsoft, compared to state attorneys general.
It was a group of states that pushed for the extension of court oversight of the software giant, while Justice officials said the 2002 antitrust settlement had largely served its purpose and should expire.
"If this deal goes through, there will be a lot of very close scrutiny ... there appears to be lots of overlap," said Harry First, a professor at New York University's School of Law. "It's complicated and very big, and a lot of enforcement agencies will be interested."
Sen. Herb Kohl, D-Wis., chairman of the Senate antitrust subcommittee, said the same issues that prompted lawmakers to review the Google-DoubleClick deal exist in a potential Microsoft-Yahoo combination, including examining how it affects consumers, advertisers and businesses "who increasingly use the Internet for their news, commerce and entertainment."
If Yahoo accepts Microsoft's offer, the subcommittee expects to hold hearings to "explore the competitive and privacy implications of the deal," Kohl said.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.



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See all 51 CommentsFor you nuts out there, if you wer a Microsoft employee working for Bill Gates you would not be rich like worth millions. What nut job company do you know of besides great ones that it happens too. Very few so I am glad to see that the little guy who works for Yahoo may get to keep his job and get rid of the rich CEO''s that destroyed Yahoo.
Go Microsoft!
This falls perfectly into the Great Emperor''s strategy of doing away with competition which has been fostered by the evil, cowardly Progressive Liberals, and replace competition with huge monopolies making it possible for these monopolies to charge whatever prices they want and, since the consumer would have no other place to go to these these products or services, the consumer would have to pay them or go without.
This "Wal-Mart economic philosphy" has worked effectively for Wal-Mart and appears to be working for other huge companies as well, such as Walgreens, AT&T, Microsoft, electric and natural gas companies, and, of course, BIG OIL!
There is, however, an old saying which goes: The BIGGER they are, the harder they fall!!!
SIG HEIL, BUSH!!!!
All sounds fantical??? Katrina was a preface to social break-down, and the example of worthless government intervention. IT IS VERY REAL, PEOPLE!
It would be great to see the 800 gorilla eat a 45 billion dollar albatross! That''d be YAHOOooooo alright!
"Ray Ozzie, Microsoft''s chief software architect, said joining the R&D capabilities of the two companies together would bring "a broad range of experience to our customers that neither could have achieved on our own."
Yeah, funny how a monopoly can do that for you isn''t it, Ozzie.
In a word, they''ve been getting "bureaucratic" across the board.
The question, though: Is Yahoo''s creativity layer vibrant enough to resist the strangling arms of an increasingly bureaucratic octopus?
Posted by nolalou at 09:53 AM : Feb 01, 2008
Under Bush, there has been no enforcement of the antitrust laws. So yes, it''s a Bush policy since he''s the one who appoints the people who are "supposed" to enforce them. Like the immigration laws, certain laws are not enforced under Bush by choice. Again, it''s called a Bush policy.
People wake up, this is just short of treason. Why should "big oil" run the world, and run the world they are, into the ground, no pun intended. I tell you these big companies are sucking the money out of the poor man''s pockets faster than a new Orick. The evil thats running this world, thinks they are invincible, but I can tell you there are a lot more good people than there are evil, and somewhere along the line its all going to come to a head, and the evil scoundrels are going to find out they weren''t as invincible as they thought they were. Of course, thats counting on a lot of good people waking up, ........ I''m waiting!
suck + suck = suck.
It''s the New World Order, baby.
Bush is certainly to blame for the financial ruin that was once America.
You fascist morons who are still defending Bush, wake up!
Posted by renrivers at 11:22 AM "
I think it''s going to take a depression and rioting in the streets to wake people up. I don''t think that''s going to happen. It might though.
It''s predatory marketing and Scientology like litigious practices has stifled far more creative and superior software products. Apple exists today only because Micro$oft needs a puppet competitor. Google exists because Micro$oft was a sleep at the wheel with the internet. At that time is was still pushing to control the masses internet experience by forcing everyone through MSN and now Microsoft Live. It still forces everyone that uses its internet products to have a unique Identification, the NUMBER OF THE BEAST, so to speak.
Open Source Software is how the computer community started. Open Source Software is the only way to keep MS from controlling every digital aspect of peoples lives, including streaming movies, music, and news onto TVs. That is why today MS is vigorously fighting Open Source Software from every possible angle, illegally in many instances; but hey, who has the most dollars and biggest stable of lawyers for court battles in the business? It is MicroSquash.
This is getting out of hand.
A Corporation has the power to buy and sell countries.
PLUS, Microsoft does NOT really care about making the best OS. They destory companies and jack-up the technology. As Bill put it... "People don''t want bug fixes; features is what they want. There is no money fixing bugs"
The Government makes DOUBLE for doing NOTHING! ZERO WORK, ZERO PRODUCT!
hey steve ... is your $h!t going to work any better after you spend $44 billion?
uh ha ... i didn''t think so.
[Posted by republic1776 at 11:52 AM : Feb 01, 2008]
that attitude exists because there''s no liability for NOT fixing the bugs ... for which there should be.
Posted by ELECTROFEX at 12:14 PM : Feb 01, 2008
ELECTRFLEX, what type of Computer& OS are you using to spew your blather on this blog?
And, yeah, that is asinine because he''s done too much to prove the opposite.
But if capitalism means competition, surely buying out the competition is a non-sequitur?
The Government makes DOUBLE for doing NOTHING! ZERO WORK, ZERO PRODUCT!" - Posted by republic1776
Did you include all the tax rebates the oil companies take from the tax payers in corporate welfare? Didn''t think so.
The government supplies the oil companies with a trillion dollars worth of blood money to steal Iraqi oil for Israel and you say the government does not supply a produce?
1 million dead Iraqis, almost 4000 dead military IS a product that they get from the tax payer. It is your children''s blood. What is that worth?
There''s still time for them to use it on a new and improved search engine though. "Microsoft Vega Search". If they get hold of Yahoo!, it will work as well as the rest of their stuff and should be named accordingly.
I won''t even touch on what lack of competition accomplishes in a free market economy...
[Posted by george2221 at 02:52 PM : Feb 01, 2008]
the next version will resolve that issue ... they''re working on it now.
[Posted by hypnotoad72 at 12:57 PM : Feb 01, 2008]
creative capitalism means selling products that are supposed to be tools that help you solve problems ... except they themselves become the problems ... and ms has the ''tools'' to solve it ... a $295/incident support fee.
creative capitalism means not having to bear any responsibility for any of this ... directly or indirectly ... as per their license agreement.
what other industry can do this ... sell garbage ... take no responsibility for it ... and charge you more to assist in making it something you can barely use?
creative capitalism means selling products that are supposed to be tools that help you solve problems ... except they themselves become the problems ... and ms has the ''''tools'''' to solve it ... a $295/incident support fee.
creative capitalism means not having to bear any responsibility for any of this ... directly or indirectly ... as per their license agreement.
what other industry can do this ... sell garbage ... take no responsibility for it ... and charge you more to assist in making it something you can barely use?
Posted by bobnjersey
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Thanks much for your response.
The bonus is, looking at where things _appear_ to be going, they are eliminating the concept of support. Which means, one has to use the tools to make something others want; not just keep them patched together. Not a bad thing as many techs spend their lives fixing rubbish products and not having time left to use said tools to make a creative product or service TO sell others.
In ways, this shake-up of the US economy, right now, isn''t such a bad thing. I just hope there''s a greater good at the end of the day.
[Posted by hypnotoad72 at 04:12 PM : Feb 01, 2008]
i was speaking of the ms products as the ''tools'' that become the problems ... then they have more ''tools'' to sell to you to fix the first ''tool'' they sold.
it''s a scam ... and their lack of liability for their buggy products allows them to continue it.
the day they have liability for the products they sell ... and the inefficiencies and exploits they produce ... will be the first day they take these issues seriously.
Who peed your corn flakes neoconism ? I''ve never noticed this - dang, I start to use them more often. Thanks for the tip.
Posted by flash2368 at 04:24 PM : Feb 01, 2008
If Steve Jobs had not tried to corner the computer market himself, Microsoft would not have the clout it does today, I have been in this industry from the ''get-go'' and watched as market manipulators like RadioShack (Tandy), Apple and a host of others all tried to go to the "you''ve got to buy it from me" mindset for replacement parts. I have had many different computers from Heathkit to IBM and watched as Bill Gates made the world sit back and take notice because he made use of a simple form of "Enlightened Self Interest" and ''Open sourced'' the majority of his programming code so that everybody could write programs themselves. You would do well to "kwitchurbitchin" and roll up your sleeves (metaphorically) to grab and growl with the rest of us. (Like Monk says, "Its a jungle out there")
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I hope Yahoo sticks to its independence.
Down with Microsoft, the evil empire...
Posted by brianbwb
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http://money.cnn.com/magazines/fortune/fortune_archive/2007/07/23/100134488/index.htm
Microsoft doesn''t seem to mind. W W t BSA D?
And to george2221, the macaddict, step away from the toy. Reality is not what you speak...
Posted by brianbwb
-------------------
http://money.cnn.com/magazines/fortune/fortune_archive/2007/07/23/100134488/index.htm
Microsoft doesn''t seem to mind. W W t BSA D?
And to george2221, the macaddict, step away from the toy. Reality is not what you speak...
You don''t know what you''re talking about. I knew Bill Gates when he was in his early 20s, who had just created the OS used by the Commodore PET. I know he did that because I worked for Commodore. He also wrote the OS for the TRS-80. Later, In July 1980, IBM representatives met for the first time with Bill Gates to talk about writing an operating system for IBM''s new hush-hush personal computer. Gates sent them somewhere else, but they didn''t like that company and came back to Bill. And Bill insisted that Microsoft retain the copyright to the OS.
You can research this on the internet if you like - but you shouldn''t go around spreading lies about people who created and run a company you don''t like.
I don''t like Microsoft either, and I like Yahoo even less. Yahoo ruined GeoCities and Webrings, and it learned not to do that again before it took over e-groups. They''ll ruin each other!
Read your history!!!
"As for an operating system (OS) for the new computers, since Microsoft had never written an operating system before, Gates had suggested that IBM investigate an OS called CP/M (Control Program for Microcomputers), written by Gary Kildall of Digital Research. Kindall had his Ph.D. in computers and had written the most successful operating system of the time, selling over 600,000 copies of CP/M, his OS set the standard at that time."
The "Microsoft Disk Operating System" or MS-DOS was based on QDOS, the "Quick and Dirty Operating System" written by Tim Paterson of Seattle Computer Products, for their prototype Intel 8086 based computer.
QDOS was based on Gary Kildall''s CP/M, Paterson had bought a CP/M manual and used it as the basis to write his operating system in six weeks, QDOS was different enough from CP/M to be considered legal.
Microsoft bought the rights to QDOS for $50,000, keeping the IBM deal a secret from Seattle Computer Products. "
They''re the best chance at knocking some fear into the big guys including Google.
[Posted by Kaelinda at 05:55 PM : Feb 02, 2008]
the first versions of dos for the intel processor were originally developed by a guy by the name of gary kildahl ... and the os was known as ''cpm''. gates & co basically stole that code from mr kildahl and sold it to ibm.
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