Microsoft has recently sent a proposal to Yahoo! Inc board of directors to obtain entire outstanding shares of Yahoo common stock at the rate of $31 per share consideration that comes about $44.6 billion on total equity value. Yahoo! Shareholders are allowed to elect and receive cash from fixed number of shares of Microsoft’s common stock along with entire consideration payable to Yahoo! shareholders comprising of one-half cash and one-half Microsoft common stock. That is actually 62% of premium over the closing price of Yahoo! Common stock as on Jan 31, 2008.
“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, chief executive officer of Microsoft. “We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”
“Our lives, our businesses, and even our society have been progressively transformed by the Web, and Yahoo! has played a pioneering role by building compelling, high-scale services and infrastructure,” said Ray Ozzie, chief software architect at Microsoft. “The combination of these two great teams would enable us to jointly deliver a broad range of new experiences to our customers that neither of us would have achieved on our own.”
It is a known fact that internet marketing is moving at a fact pace, it was just about $40 billion during 2007 and expected to serve $80 billion by the year 2010. The consequential advantageous of scale along with the allied capital costs for advertising way providers make this a period of market thought and union. Today advertising market is more and more dominated by only one player. Jointly, Microsoft and Yahoo! Might certainly offer a viable choice while improved fulfilling the requirements of clients and customers.
“The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs,” said Kevin Johnson, president of the Platforms & Services Division of Microsoft. “The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers.”
The synergies of more efficient company could be categorized in four areas:
- Scale economies determined by audience critical mass and augmented value for advertisers
- Combined engineering capacity to go with faster innovation
- Operational efficiencies through removal of redundant cost
- The ability to innovate in up-and-coming user experiences like video and mobile.
Microsoft believes these four areas would make at least $1 billion in yearly synergy for the joint entity. Microsoft added that it expects Yahoo’s board to agree to the contract quickly, but Yahoo stated over the weekend that it is hoping to take "quite a bit of time" to consider all of its strategic options comprising remaining independent.
What Google Says?
Google’s official blog says "Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ email, IM, and web-based services?"
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