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Following a year slumping stock prices and weeks of lay-off rumors, Microsoft has made their move, bidding a reported $44.6 billion for search engine Yahoo! Inc. The bid was unsolicited, and it has the technology world buzzing with excitement. This is perhaps the most calculated move which Microsoft has made in response to Google’s dominance of online advertising and search, and industry experts are eager to see how the takeover will play out.

In a press release issued this morning, Yahoo! states: “The Company said that its Board of Directors will evaluate this proposal carefully and promptly in the context of Yahoo!’s strategic plans and pursue the best course of action to maximize long-term value for shareholders.” If they really want to please the shareholders, they’ll take the money and run. Their profits have declined for five consecutive quarters, and they’ve announced significant lay-offs later this month. The deal would be a 62 percent increase over the closing price of their stock on Thursday. Microsoft’s offer is $31 per share, which is no doubt an attempt to pounce while Yahoo is weak.

If the deal goes through, it would be largest acquisition Microsoft has ever made. The AP spoke with Microsoft CEO Steve Ballmer, and he is optimistic about the deal. “This is a decision we have - and I have - thought long and hard about. We are confident it’s the right path for Microsoft and Yahoo.” Ballmer also issued a press release expressing his hopes for the future: “We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”

The deal would increase competition in the growing online advertising market, a space in which both Yahoo! and Microsoft have struggled. The online ad industry is expected to double by 2010, and Google currently holds the keys to the kingdom. Despite its popularity as a portal site, Yahoo! has failed to attract major advertising dollars. The deal could also lead to a combined search engine, drawing on users from Yahoo and MSN, which are both failing to compete with Google’s 60 percent share of the search market.

What does this mean for current Yahoo and Microsoft users? The Guardian is predicting that Flickr and Upcoming could replace Microsoft products which aren’t as popular. They also expect web-based office suites could be rolled out to rival Google Apps. Microsoft’s Office suite software could be accessible to Yahoo! Mail users, a strong user-base for the company. Microsoft has made no promises regarding branding, however, so major changes to Yahoo!’s image could be forthcoming.

The Justice Department has expressed interest in examining the deal, which could create significant problems for Microsoft. Google recently faced opposition in its acquisition of DoubleClick, though the merger was eventually cleared by the FCC. Microsoft has indicated their strong commitment to this deal, and negotiations may turn hostile. In their letter to the Yahoo! Board of Directors, Microsoft says it, “reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

Rest assured, bloggers and news outlets around the world will be watching this story, and it will be fascinating to see if Microsoft has finally struck a deal that will give them the chance to compete with Google.

Friday, February 1st, 2008 You can skip to the end and leave a response. Pinging is currently not allowed.

By Haley January Eckels