Surely this is one of the hottest pancakes story in the tech world today, Microsoft striving to buy Yahoo!. This is Microsoft's latest quest to engage itself in a head on tussel with Mountain view based internet major Google.
Google which started its online venture in 1999 much later than Microsoft and Yahoo has outpaced them and turned the industry statistics upright with its simple but innovative applications and tweaks. Realizing the power of internet it made calculated moves and launched proprietary technologies like ad-sense, blogger, picassa,google earth and now has entered the mobile areana with an open platform called ANDROID. Microsoft focused on the traditional PC software market, and Yahoo was not so agile which gave Google the time to nurture and establish itself.
Today Google is the leader in the internet market, be it search, i-ad and is slowly inching to beat Yahoo on its very own turf i.e. the e-mail business.
If we look at the statistics Google controls the total internet search market with 77.23%, Yahoo has got a little over 12% while Microsoft with its 'msn and msn-live' totters at 5.97% while the rest is shared between AOL,ask.com,lycos,crawler and others.
Clearly Micrsoft has struggled and is still struggling to beat Google in the internet search and i-ad arena. It wants to caputure a majority share in the USD 45 billion global i-ad market, a market which is expected to reach USD 80 billion in the next two years. So, there lies Microsft's interest. It has got the whim and muscle but needs the brains who can turn the table. Surely Yahoo has and thus Microsft made an unsolicited bid to acquire Yahoo at USD 31 per share at a 62% premium on February 1st, 2008 which effectively aggregates to USD 44.6 billion.
Yahoo rejected the offer outright quoting it does not represent the true value of the company. What is interesting in the whole story is, the way it is progressing and the CEOs are talking. It is not like the usual coporate talks but certainly more than that.
You can hear Ballmer say "I know Yahoo's value and not going to raise the offer even with a single cent". He also openly says that if not this way, he can go by the unfriendly way or may simply walk away (which surely won't happen, tats my guess).
Interestingly in the rejection letter Yahoo chief Jerry Yang wrote
" .....Your own statements have made clear the strategic importance of Yahoo!'s substantial assets and capabilities to Microsoft. We regret to say that your letter mischaracterizes the nature of our discussions with you. We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues. Your comment that we have refused to enter into negotiations to conclude an agreement are particularly curious given we have already rejected your initial proposal, nominally $31 per share at the time, for substantially undervaluing Yahoo! and your suggestions in your letter and the media that you are considering lowering the value of your proposal. Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit."
It appears as if me and you are trying to negotiate on buying an iPod from a third friend or anywhere. Microft has maintained a silence since then and it seems Yahoo is determined to demand and get a higher value for its share. It may happen that Microsft will have to raise their bid upto anything from USD 35 to 40 per share.
What will happen is a matter of time but the CEOs are in their ROADIES gear, and that is for sure!!!
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