Steve Inskeep and Todd Bishop of The Seattle Post-Intelligencer: Behind Microsoft's Strategy
What do Microsoft and Yahoo stand to gain from the deal, which would be Microsoft's largest ever? Read a Q&A
Microsoft Corp. on Friday announced it has made an unsolicited bid to buy Yahoo Inc. for $44.6 billion. Yahoo, which has seen its profits and share price slide in recent months, said it would consider the offer.
In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer indicated the world's largest software maker is determined to bring the two companies together.
The move is seen as a direct challenge to Google Inc., whose dominant Internet search engine has catapulted the firm to the top rung of technology companies. Google's share price plunged in early trading Friday on news that it would fall short of its earnings forecast, as well as the Microsoft-Yahoo deal.
Microsoft made a similar offer last year that was rebuffed by then Yahoo CEO Terry Semel, who later stepped aside under pressure from shareholders.
"A year has gone by, and the competitive situation has not improved," Ballmer added.
Yahoo confirmed the surprise offer of $31 per share, made late Thursday and announced Friday. It comes as the Sunnyvale, Calif.-based Internet icon's stock slipped to a four-year low earlier this week and new management was put in place to try to steer a turnaround.
Yahoo said its board would evaluate the 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."
Microsoft said it sees at least $1 billion in cost savings generated by the combination, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees.
The software giant said it believes the takeover would receive regulatory clearance, and that the deal would close in the second half of 2008. However, the Justice Department said Friday that it is reviewing possible antitrust issues and the competitive effects the deal might have.