Feb. 1 (Bloomberg) -- Microsoft Corp., the world's biggest software maker, made an unsolicited $44.6 billion offer for Yahoo! Inc. to challenge Google Inc.'s dominance in Internet search services and advertising.
The $31-a-share bid of cash or Microsoft stock is 62 percent more than Yahoo's closing price yesterday. Before today, Yahoo had dropped 18 percent this year in Nasdaq Stock Market trading, and this week posted a 23 percent profit decline for the fourth quarter.
Microsoft Chief Executive Officer Steve Ballmer is attempting the biggest-ever technology takeover after failing to compete with Google in a market that may almost double to $80 billion by 2010. Google's growth has outstripped the pace set by Microsoft in every quarter since Google's 2004 initial public offering as its search engine won more users.
``Microsoft is under massive pressure to expand its Internet business to fend off competition from rivals such as Google and this deal shows how desperate they are,'' said Thomas Radinger, a fund manager at Pioneer Investments in Munich, which oversees about $95 billion, including Microsoft shares. ``It's a huge gamble as the price is very steep and it will take years to successfully integrate such a massive acquisition.''
Yahoo rose 54 percent to $29.46 in early trading after closing at $19.18 yesterday. Microsoft, based in Redmond, Washington, fell $1.20 to $31.40 after closing at $32.60 yesterday in Nasdaq trading. Google fell 6.3 percent to $528.79.
Diana Wong, a spokeswoman for Sunnyvale, California-based Yahoo, declined to comment.
Yahoo's Stumble
Yahoo's inability to crack Google's dominance in search has led to eight straight quarters of declining profit and a stock that's lost half its value in the past two years.
``It shows how serious the threat is from Google,'' Jordan Rohan, an analyst at RBC Capital Markets in New York, said in an interview. ``Yahoo is vulnerable. Investors are losing patience with the Yahoo management team.'' The New York-based analyst rates the stock ``outperform.''
Google yesterday reported a 52 percent increase in fourth- quarter sales growth, its 14th straight quarter exceeding 50 percent. Still, profit and revenue trailed analysts' estimates as it received less money than expected from ad deals with social- networking sites like News Corp.'s MySpace.
Google, based in Mountain View, California, captured 56 percent of U.S. Web queries in December, almost double the combined share for Yahoo and Microsoft, which attracted 18 percent and 13 percent. Searches will account for 37 percent of the $27.5 billion U.S. online advertising market in 2008, estimates research firm EMarketer Inc.
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NVDL: I don't see how this would be a deal that would be good for anyone.
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