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Microsoft vs YahooGoogle — The end of the Drama.

May 5, 2008



Good Morning ,                                                                                                               


                                                                                                       Microsoft and Yahoo signs in Times Square, New York


So finally, the long awaited three month old Battle has come to an end.With the software giant Microsoft walking away from yahoo after dropping its three month old bid to buy the Internet firm after the two parties did not agree to the acceptable sales price


Microsoft chief executive Steve Ballmer formally withdrew the offer in a letter to Yahoo chief executive Jerry Yang. Mr Ballmer said Microsoft had raised its original offer from $44.6bn to $47.5bn (£24.1bn) – $33 per share. But he added that Yahoo had insisted on at least $53bn, or $37 a share – more than Microsoft was prepared to pay.

The software giant had wanted to do a deal to be able to compete with Google, which dominates the lucrative market for internet advertising.

This market was worth $40bn in 2007 and is predicted to double to $80bn by 2010.


Google and Yahoo to share web ads


Yahoo sign


Yahoo says the experiment may not lead to a "lasting relationship"

Yahoo and Google, the world’s two biggest search engines, have announced a two-week experiment that will see them share advertising space.

During the pilot, Google will be able to place ads alongside 3% of search results on Yahoo’s website.

Analysts say the move is designed to frustrate Microsoft, which has offered to buy Yahoo for $44.6bn (£22.6bn), or extract a higher offer.

The news came as both sides were reported to be forging other alliances.

Microsoft and News Corp are discussing making a joint bid for Yahoo, according to the New York Times.

"Yahoo’s moves are proof positive that it is standing with the back againts the firewall "

Tim Weber
Business editor, BBC News website


The idea would be to combine three of the world’s most visited websites: MySpace, Yahoo and

News Corp had previously discussed working with Yahoo to see off Microsoft’s offer.

At the same time, Yahoo is looking to Time Warner’s AOL to keep out of Microsoft’s hands, according to the Wall Street Journal

Microsoft criticised Yahoo’s advertising trial with Google, saying any lasting deal would not be in the consumers’ interests.

"Any definitive agreement between Yahoo and Google would consolidate over 90% of the search advertising market in Google’s hands. This would make the market far less competitive," Brad Smith, Microsoft’s General Counsel said.


Profiles: Microsoft and Yahoo



The world’s dominant provider of personal computer operating systems, Microsoft has a market share of about 90%.

Bill Gates

Founded in 1975, it now enjoys annual revenues of $51bn and has a workforce of 79,000.

Headquartered in Washington State, founder Bill Gates is the world’s richest man.

Mr Gates has an estimated personal fortune of $56bn.

The company’s dominant market position has led to numerous criticisms that it stifles competition.

In February, the European Commission launched two new anti-competition investigations into the company.

The Commission had previously fined Microsoft a record 497m euros for anti-competition practices in 2004, a ruling Microsoft eventually lost on appeal last year.



Yahoo is the world’s second most popular internet search engine, yet it trails far behind market leader Google.

Yahoo headquarters

A study in August last year showed that Google carried out 37 billion searches that month, while Yahoo did only 8.5 billion.

As a result, Yahoo’s advertising revenues are also far lower than Google’s.

Yahoo posted a loss for all four quarters of 2007, and is now continuing with job cuts and other cost reduction work.

Founded in 1995, Yahoo is based in Sunnyvale, California, and led by chief executive Jerry Yang.

It currently employs 14,300 staff.


Profile: The Google


Larry Page (left) and Sergey Brin, Google founders

Larry and Sergey – the boys next door


The founders of the Google internet search engine – Larry Page and Sergey Brin – are the type of young men most parents would dream of their daughters bringing home.

And far from simply because they will both be billionaires following a stock market flotation of Google.

Google today has its headquarters at Mountain View in the heart of California’s famous Silicon Valley, where certain quirks are in place to keep staff happy.

Google logo

Google is the undisputed world number one internet search engine

Pulling together $1m from family, friends and other investors, on 7 September 1998 Google was commercially launched from a friend’s garage.

Growth was quick.

Initially, Google got 10,000 queries per day compared with 200 million today.

Google for its part has managed to link up its disparate suite of web tools in a nicely integrated offering. Getting from Gmail to Google Docs to Google Maps to Google search to Google reader or even Google Earth requires just a click or two.


Analysis: Microsoft without Yahoo


So who is the loser then, now that Microsoft has withdrawn its takeover bid for rival Yahoo?

On the face of it, both companies are. After all, who can tackle the Google behemoth bestriding the world wide web?

Steve Ballmer and Jerry Yang

Steve Ballmer and Jerry Yang both face the Google challenge

However, that assumes that the combination of Microsoft’s and Yahoo’s DNA would have created a top athlete, not a corporate Frankenstein.

Microsoft chief executive Steve Ballmer may beg to differ, but it was far from certain that the combination of two not-quite-that-successful teams of web engineers would have resulted in a credible challenger for Google.

Ultimately, Microsoft’s bid for Yahoo was probably not about technology, but eyeballs – the term used by advertising executives to describe a website’s number of users.

Despite all its troubles, Yahoo still commands a lead in the all-important US web market, and it has a healthy market share in many countries around the world.

As Microsoft had difficulties growing its global web reach organically, buying eyeballs – or market share – through the acquisition of Yahoo was the obvious solution.

Now Mr Ballmer has to come up with a Plan B.

Already Microsoft’s "Live" offering of search, maps and other tools is beginning to resemble and in some ways – for example video search – even excels the Google proposition.

It is still done in a very old-school Microsoft way, and creaking and jarring in many places. Travelling the Microsoft Live universe gives users a feel for the rivalries between the many competing teams within Microsoft.

At Yahoo meanwhile, champagne corks will be popping as it has escaped the clutches of Microsoft. The next day, though, will see Yahoo wake up with an almighty hangover.

Yahoo founder Jerry Yang promised shareholders and staff that "with the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history".


Why did they want to get together in the first place?


I have three words for you: Google, Google, Google.

When the Internet was young, Yahoo was its 800 pound gorilla, and Microsoft – after a false start – managed to acquire silverback status on the web as well.

Google has changed all that. Not even 10 years old – the birthday candles will be blown this September – Google is the one company that has cracked the secret of how to make big bucks on the internet.

Its search engine rules supreme – achieving a market share of more than 80% in regions like Europe. And its search advertising business has turned out to be the world’s largest internet goldmine.

As Google spreads the reach of its business, it seriously undermines Yahoo’s and Microsoft’s sources of internet revenue. Its moves into the field of on-demand software , meanwhile, pose a fundamental threat to Microsoft.

We will probably never know whether a combination of Yahoo and Microsoft would have created a formidable challenge to Google.

But Microsoft’s bosses clearly believed that a combination of the two could have done the trick.

Microsoft dearly wants to catch up with Google, and fast.

Mr Ballmer has now told staff that this is still its ambition.

Together with Yahoo this could have been achieved faster, he says, but he also believes that the world’s richest technology company can do it alone – albeit at a somewhat slower pace.


Why did Microsoft and Yahoo fail to reach an agreement?

It simply came down to money. Yahoo’s bosses argued that Microsoft undervalued their company – even though the offer was raised twice in secret negotiations.

Microsoft had originally offered a 62% premium on Yahoo’s share price, based on the day the merger proposal was made. In the end this bid was improved to a 70% premium.

That still wasn’t enough for Yahoo’s board and management, who argued that their company was on the road to recovery.

There is a suspicion that Yahoo’s bosses simply didn’t want to do a deal on principle. There has never been any love lost between the two companies.

Demanding a very high price for Yahoo may have been a convenient way of not making the deal happen.


SHARE PRICE CHECK as on 5th may 1998


Microsoft Corporation

Microsoft Corporation intraday chart

Yahoo! Inc.

Yahoo! Inc. intraday chart


Google Inc.


Google Inc. intraday chart


Microsoft exit hits Yahoo shares


Yahoo’s shares have plunged 20% in value in trading in Germany after Microsoft dropped its three-month-old bid to buy the internet firm.

In pre-market US exchanges, Yahoo shares fell 22% and analysts expect them to drop by a similar margin when Wall Street opens for business later.

Yahoo’s New York shares closed at $28.67 on Friday. They are listed on the technology-dominated Nasdaq index.

The deal collapsed after the two sides could not agree on the sale price.

Microsoft boss Steve Ballmer formally withdrew the offer in a letter this weekend to Yahoo’s head, Jerry Yang.


Yahoo faces shareholder questions.


In Frankfurt, Yahoo’s shares were down 20.2% at 14.45 euros ($23.17) by lunchtime.

"Mr Yang is certainly under a lot of pressure now," said Roland Hirschmueller, an equities trader at German brokerage Baader.

"His days are numbered, if he doesn’t manage to come [up] with an alternative strategy," he added.


See the related videos.

  1.    Should Microsoft buy Yahoo-(CTRL +CILCK)

  2.   BT on Microsoft bid for Yahoo (CTRL+ CLICK)




                                                                                                ANURAG DUBEY






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