Update: Microsoft offers to buy Yahoo for $44.6B
Software vendor hopes deal would help it further challenge Google in online services
CEO Steve Ballmer made the offer in a letter to Yahoo's board of directors yesterday, telling the board that he would release the letter this morning.
On a conference call this morning, Microsoft's president of its Platforms & Services division Kevin Johnson called a combination of Microsoft and Yahoo a more "credible" alternative to Google in the online advertising and services market.
"By combining the assets of Microsoft and Yahoo, we can offer a more competitive choice for consumers, advertisers and publishers," he said.
The market for online advertising is increasingly dominated by one player, Microsoft said, and merging with Yahoo will allow it to offer a competitive alternative.
It was Yahoo's board that first approached Microsoft, in February 2007, according to Microsoft executives. But, Ballmer said, "a year ago, the Yahoo management team said it wasn't the right time" for such a deal.
Now, he added, a combination of the companies is needed to fight back against Google's market dominance. "This is a decision we thought about, and I personally thought about, very, very hard," Ballmer said. "The market continues to grow, and the leader keeps consolidating its position."
Johnson said that the search and online portal business requires "scale economics" to support the massive capital-equipment investments needed from a systems infrastructure standpoint, as well as the cost of research and development, engineering and support.
Currently, Johnson said, the market "is ruled by one" — i.e., Google. "The industry will be better served by having competition," he added.
Yahoo, in a statement, said its board will carefully evaluate Microsoft's proposal, which it described as unsolicited.
Search Market Share
|Searches (000)||Share of Searches|
Microsoft expects the market for online advertising to almost double in size over the next three years, from $40 billion in 2007 to $80 billion by 2010. A merger will allow the company to realize economies of scale and reduce capital costs as it addresses this market, it said.
"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," said Ray Ozzie, chief software architect at Microsoft, in a statement.
Microsoft expects to cut costs by $1 billion a year by realizing synergies with Yahoo in four areas: obtaining economies of scale as its audience increases; combining its research and development efforts with Yahoo's to innovate faster; eliminating operational redundancy to cut costs; and pooling expertise to innovate in video and mobile.
- Improving Business Value of WAN Optimization Want to achieve faster ROI with WAN optimization? Read the latest IDC report and discover how you can cut IT costs without compromising...
- Four Little-Known Ways WAN Optimization Can Benefit Your Organization Read this white paper to learn how far WAN optimization has come, and how to make this most of your investments by using...
- IDC ROI Infographic Trends such as evolving communication patterns, connection types, applications and bandwidth can have an impact on enterprise organizations. Learn how IT organizations can...
- Path Selection Infographic Path Selection Infographic
- Live Webcast IBM FlashSystem V840: Leveraging Software-Defined Flash to Drive Your Business With end-to-end, tightly integrated functionality and super-fast flash technology, products like IBM FlashSystem V840 Enterprise Performance Solution empower businesses to leverage the efficiency...
- IBM FlashSystem V840: Leveraging Software-Defined Flash to Drive Your Business With end-to-end, tightly integrated functionality and super-fast flash technology, products like IBM FlashSystem V840 Enterprise Performance Solution empower businesses to leverage the efficiency...
- Top 4 Digital Signage Fails Join RMG Networks for a look at four of the most common reasons digital signage fails in corporate businesses. Learn about strategies to... All Networking White Papers | Webcasts
Our new bimonthly Internet of Things newsletter helps you keep pace with the rapidly evolving technologies, trends and developments related to the IoT. Subscribe now and stay up to date!