14 DAY TRIAL // Today, February 1st, 2007, Microsoft came down with a consistent $44.6 billion - cash and stock - marriage proposal to Yahoo. The offer marks an aggressive move from Microsoft that has went public with the takeover bid, after it was turned down by Yahoo on several occasions in the past. The combination of Yahoo and Microsoft would end up creating a new power house on the search engine and online advertising markets that will go head to head with Google. Of course, it all hangs in balance at this point in time, as Yahoo has called the offer unsolicited and only said that it would take it into consideration.
"Yahoo 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," Yahoo revealed in an official response.
With its search engine market share slipping, audience eroding and profits having fallen to $660 million in 2007, from $751 million in 2006, Yahoo cannot really afford to play hard to get. The moment could not be more fertile for Microsoft's acquisition proposal, especially since the Redmond company is offering shareholders a 62% premium to current trading price for Yahoo.
"In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that 'now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.' 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," Microsoft Chief Executive Office, Steve Ballmer, stated in the letter addressed to Yahoo's board of Directors.
The acquisition is of course aimed at Google's dominance over the online advertising market. By swallowing Yahoo, Microsoft revealed that it would also retain all employees up to key leaders, and that the respective services offered by the Sunnyvale company would be melted into Microsoft's. The Redmond company referred specifically to the scale economics of the two advertising platforms, the growth of the R&D capacity, the increase in operational efficiencies and a stronger focus on delivering innovation for the video, mobile services, online commerce, social media, and social platforms.
"Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience. Depending on the nature of your response, Microsoft 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. We believe this proposal represents a unique opportunity to create significant value for Yahoo!'s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers," Ballmer stated.