4 February 2008
Microsoft last week made an unsolicited approach to the Board of Yahoo! offering a bid of £26.7 billion, a move that could create a considerable threat to giant, Google.
Yahoo! acknowledged the proposal and said it would be evaluated "carefully and promptly."
Both companies have previously held talks about merging in 2006, however in February 2007, Yahoo! told Microsoft that they weren’t interested in being acquired.
Yahoo! has always struggled against Google and its market share, in the past three months, Yahoo!’s share fell approximately 40%.
According to ComScore, Google was the most-used US search engine in December with 58.4% market share. Yahoo! held second place with 22.9% and Microsoft came third with just 9.8%.
In the letter to Yahoo!, Steve Ballmer, CEO of Microsoft said:
While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.
Ballmer said that Yahoo's decision at the time was based on the "potential upside" of its own plans and a "significant organisational alignment," led by the long- awaited overhaul to its search-advertising system dubbed Project Panama.
Neil Jackson, Search Director at Tamar which advises brands on search strategies said:
Independently Yahoo! and Microsoft have failed to close the gap on Google, in fact, they have failed to plug the dam that is leaking users to Google. While there are undoubtedly great synergies to be had from aligning the businesses do two wrongs make a right? Why would they get the right answer by working together when working apart they were going backwards? The offer that Microsoft has made for Yahoo! is considerable and paying a 62 per cent premium on current share price seems a lot given the current financial climate, but Microsoft will be in it for the long haul. On the plus side, anything to challenge Google's UK dominance would be healthy and encouraged. Ultimately it will be users who decide who succeeds and so far Google is winning hands down.
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