Is Microsoft Yahoo deal hot or not?

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Is Microsoft Yahoo deal hot or not?

Microsoft has made an unsolicited $44.6 billion bid for Yahoo. The bid, which would consist of cash and Microsoft stock, values Yahoo shares at $31 a share, a 62 per cent premium. It would provide a strong competition to their common foe Google.

CJ: Devarshi Upadhyay

Tue, Feb 05, 2008 12:13:49 IST

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RECENTLY MICROSOFT’S (NASDAQ:MSFT) proposed $44.6 billion purchase of Yahoo (NASDAQ:YAHOO). Many retorts have then come into place of whether this shall strengthen the competition on the Internet or weaken it?

That’s the question antitrust regulators in the US and Europe shall tussle with in the coming months -- though experts expect the deal ultimately to get approved if it moves forward.

Microsoft has made an unsolicited $44.6 billion bid for Yahoo. The bid, which would consist of cash and Microsoft stock, values Yahoo shares at $31 a share, a 62 per cent premium This shall result in an equation as follow: Microsoft + Yahoo = a stronger competitor to the Google

Recent talks between Microsoft Corporation and Yahoo Inc. over how to band together betray increasing unrest at Microsoft over how to compete with Google Inc. and get in step with the booming online-advertising market.

Microsoft and Yahoo discussed a possible merger or other match up that would pair their respective strengths. The merger discussions are no longer active, but that doesn’t stop the two companies from some other form of cooperation.

Whatever the outcome, Microsoft’s online division could be heading for a shake-up. This deal, if successful will bring a strong competitor to Google in online advertising market, where Google enjoys approximately 68 per cent market share. Not only this, Microsoft will also get a huge support for the progress of its not so popular MSN search engine if Yahoo joins hands with (Microsoft Network) MSN and this shall pose another big slap on the Google’s dominated search engine that has 76 per cent market share.

Google raised the presence of Microsoft Corporation using its proposed $42 billion acquisition of Yahoo to gain illegal control over the Internet, underscoring the online search leader’s queasiness about its two biggest rivals teaming up. Google’s unfriendliness isn’t a surprise, given that Microsoft views Yahoo as a fundamental weapon in its battle to gain ground on Google in the Internet’s booming search and advertising markets.

Also, Google is delivering a scenario that a starkly different picture, asserting that Microsoft will be able to throttle innovation and influence its dominating Windows operating system to set up personal computers so consumers are automatically steered to online services, such as e-mail and instant messaging, controlled by the world’s largest software maker.

The majority analysts judge that Yahoo shall have little choice but to sell to Microsoft, with its stock price nearly at a four-year low at the time of the bid and its profits falling since late 2006. When it was first announced, Microsoft’s offer was 62 per cent above Yahoo’s market value -- a premium, analysts also doubt any other suitor or competitor will be able to top.

Some of the quick stats you would like to check out:

Deal: Microsoft offers to buy Yahoo

Why: Microsoft wants to buy into the search/online advertising biz. Yahoo is struggling. Their common foe: Google.

Price: $44.6 billion -- half cash, half stock -- a 62 per cent premium over Yahoo’s price a day earlier.

Key pre-merger stats:

Market cap: Microsoft: $303 billion; Yahoo: $25.6 billion

Revenues: Microsoft: $58 billion; Yahoo: $7 billion

Net profit: Microsoft: $16.9 billion; Yahoo: $660 million

Deal to complete when: Microsoft is targeting the end of this year, if Yahoo agrees and no regulators call foul.

Whether this deal will be a boom to the Internet industry or a curse cannot be predicted. But it will surely leave a huge revolutionary impact on the online industry.

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