!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
The battle for the Internet's soul has taken on new intensity today with Microsoft has finally making its long anticipated move for Yahoo! – the flagging online services company. Its unsolicited bid of $31 per share represents a 62 per cent premium on today’s Yahoo! Share price.
The main driver for the move appears to be Microsoft’s desire to offer genuine competition to Google in the online advertising market, where the search engine giant currently dominates. This domination is set to increase with Google’s acquisition of web advertising firm DoubleClick, with the only remaining obstacle to the move being a potential objection from the EU about the move being anti-competitive. Ironically, today’s development could be all the EU needs to be reassured that there will be adequate competition for Google and thus approve the DoubleClick acquisition.
“We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” said Steve Ballmer, CEO of Microsoft.
While Google is not named, one paragraph from the Microsoft press release makes it very clear who this move is aimed at. “The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners.”
Microsoft overtly courted Yahoo! A year ago, but was told to back off because the Yahoo! Board thought it would be able to provide better value for shareholders through its own improved performance than they could get from selling. A year on that hasn’t materialised, which is why Microsoft is obviously confident that its offer will be accepted.
Just to make sure, Microsoft offered $31 per share when Yahoo!’s (?) stock closed at $19.18 yesterday, pretty much a 12 month low. It was at $31 three months ago, but profits have continued to fall since then and it announced it was cutting a further 1,000 jobs at the start of this week. Still, you would’ve thought that an offer of, say, $25 per share would still have looked pretty tempting to shareholders.
Microsoft will have felt additional pressure to give Google a run for its money in the online advertising market by the fact that Google has increasingly been encroaching on its software space. Google is already offering free productivity software as an alternative to Office and is developing an operating system bundle for mobile devices called Android.
