Microsoft's offer to buy Yahoo rattles IT industry

By Editorial Desk
Publisher:The Yomiuri Shimbun - Publication Date: 03-02-2008

Microsoft Corp., the world's largest software maker, made an unsolicited offer Friday to buy Yahoo Inc., the world's second-largest Internet search service company, for 44.6 billion dollars.
Innovation in the information technology industry happens at breakneck speed. Microsoft's bold move speaks volumes about the cutthroat competition for survival among IT businesses.
Microsoft's 31 dollars-a-share offer was about 60 percent higher than Yahoo's closing price Thursday and showed Microsoft was going all out to ensure the offer got off the ground. Yahoo shares soared on the New York stock market as investors warmed to the prospect of realignment in the industry.
Microsoft, cofounded by Bill Gates and another young entrepreneur in 1975, has been at the forefront of the IT industry, dominating the market for personal computer operating software.
Taking on Google
But Google Inc., a latecomer founded in 1998, rapidly went from strength to strength through its online advertisement businesses linked with Net search services. The company boasts a share of more than 60 percent of the U.S. search site business market. Yahoo, a pioneer in Net businesses founded in 1995, accounts for about 20 percent of the market share, while Microsoft holds about 10 percent.
Microsoft intends to make Net businesses a new revenue source, a plan that germinated out of necessity after the company realized it had to do something lest it fall further behind Google.
The merger offer is Microsoft's attempt to take the offensive with Yahoo's help. For Gates, who plans to retire from actual management this summer, the merger offer is a big roll of the dice as he tries to swiftly establish a base for further growth.
Microsoft and Yahoo held talks in 2006 and 2007 for a possible tie-up and management integration. But Yahoo got cold feet and the talks ended without agreement.
Not a done deal
Whether Yahoo will accept Microsoft's latest offer is still unknown. Yahoo, however, is performing poorly and is under pressure to introduce job cuts and other restructuring measures. With little prospect of its original business style bringing about a change in fortune, some observers predict the company will accept the merger offer.
In simple calculations, Net-related businesses of Microsoft and Yahoo have total annual sales of about 10 billion dollars. This is comparable with Google's 16.5 billion dollars.
The consortium of Microsoft and Yahoo, if it materializes, would bring benefits such as reduced costs in research and development and more user-friendly services under a combined brand image. The merger also would create a rival capable of taking on Google and significantly change the landscape of the IT industry.
Yahoo's Japanese unit is the dominant player in online search services in this country, but Google's arm here is catching up. Competition in the Net advertisement business, which is expected to grow rapidly, and mobile Net services likely will intensify in Japan as well.

Title : Google balks at Microsoft bid for Yahoo

Date : 04 February 2008 0642 hrs (SST)
URL : Channelnewsasia.com

SAN FRANCISCO: Internet giant Google said Sunday it finds "troubling" Microsoft's multi-billion-dollar bid to acquire rival Yahoo and urged US and international regulators to strenuously vet the proposed deal.

"Microsoft's hostile bid for Yahoo raises troubling questions," read a statement by David Drummond, Google's senior vice president for corporate development and chief legal officer.

"This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation," he said in a written statement.

He accused Microsoft of using its competitive advantage in the personal computer market to gain "inappropriate and illegal influence over the Internet" and said it was likely to try to do the same if it acquires Yahoo.

"Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets," he said, adding that the Redmond, Washington-based company has a "legacy of serious legal and regulatory offenses" which it could not extend to the Internet.

Microsoft announced Friday it is courting California-based Yahoo with a 44.6-billion-dollar offer.

Members of Congress's House of Representatives Judiciary Committee have scheduled a hearing later this week to probe the antitrust implications of such a merger.

The committee's Antitrust and Competitive Policy task force will hold the hearing to give the proposed Microsoft-Yahoo merger "careful examination," the panel said in a statement.

Yahoo would give Microsoft a search engine to compete with Google's; a popular web portal for email, shopping and news, as well as one of the most recognised brands among online users.

The deal could reshape the landscape for high technology by combining Microsoft and one of the leading brands on the Internet.

The move comes as Yahoo is losing ground rapidly in the Internet space to Google, a search leader which has cashed in on the market for online advertising. - AFP/ac