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News > May 2007

05-May-2007

Microsoft Plans To Acquire Yahoo

Microsoft have established more concrete plans for acquiring Yahoo! After the Google deal with doubleclick it means there is not too much left on the market. If Microsoft will need to buy to become a player in the market. Stung losing Internet advertising firm DoubleClick to Google last month, Microsoft has intensified pursuit of Yahoo.com And asked the company to re-enter into formal negotiations.

Microsoft and Yahoo! have held informal deal talks over past years however sources say the latest approach signals an urgency on Microsoft's part. The approach follows an offer from Microsoft to acquire Yahoo! a few months ago. Yahoo! spurned advances from the Redmond, Washington-based software corporation. Wall Street sources put an estimated $50 billion on Yahoo!.

"They're getting tired of being left at the altar. They now seem more willing to extend themselves via a transaction to get into the game."said a source in talks with Microsoft. Google keeps beating Microsoft on the deal front, not just on DoubleClick, but also with a renewed search advertising pact with AOL in 2005 that Microsoft sought.

Google developed Internet software directly competes with Microsoft Office which may mean Microsoft has no choice but to go on the offensive. "The minute you hear Microsoft start arguing against something on antitrust grounds, you know they are desperate and need to do something big," mentioned one source. Sources suggest Microsoft is working with Goldman Sachs.

News about Microsoft's latest approach comes as the new search advertising platform from Yahoo, Project Panama is just getting established. The long-awaited platform established disappointing first-quarter results, although sources suggest it was more to do with a function of difficult comparisons to a year-earlier period and not so much the system failing. Another quarter or two of similar results and investors may begin renewing calls for sale or for CEO Terry Semel to resign post.

A deal between Microsoft and Yahoo! would improve the combined companies' share of the search advertising market to 27 percent comparing to Google's 65 percent. It would narrow the gap in online ads with Google to only 13 percent. It would create a dominant force on the Internet which is an important consideration as more content flows online. Microsoft and Yahoo! also feature complimentary offerings on content, with MSN drawing older audiences (with its news focus).

Yahoo! attracts a younger demographic focusing on entertainment coverage. Apart from cost savings, the deal would also create opportunities to use Yahoo! content on Microsoft devices, (e.g. making music only provided to Yahoo! Music available on Microsoft's Xbox game console and Zune music). Yahoo! And Microsoft declined comment on the subject.