Microsoft offers to buy Yahoo! for $44.6 bn
Microsoft has offered to buy Yahoo! for USD 31 per share, reports CNBC-TV18. The offer represents USD 44.6 billion equity value which is at a premium of 62% over Thursday’s close. The software major feels Yahoo! has significant upside potential.
Microsoft and Yahoo! explored working together in late 2006. The offer is not subject to any financing condition. It expects Yahoo’s board to fully review the proposal.
“At USD 31, it becomes a no-brainer. You got to think of how do you not take that. Having said that, that is going to be the game theory going forward. Can Yahoo somehow force them up? If you look at the letter, they have been looking at this compnay, at the USD 20 range. Now, they are close to their lows and they almost have to say yes. It is more an issue of can Microsoft actually make this work. Culturally, this isn’t something that MS has done well putting the business together,” said Andrew Ross Sorkin of The New York Times.
Surya Mantha, CEO, Web18, said if the deal goes through it will give Microsoft access to terrific engineering capability, great set of services that are quite successful whether it is email or instant messenger, and a great team and brand.
Excerpts from the exclusive interview with Surya Mantha:
Q: What’s in it for Microsoft? Why does it so badly want Yahoo?
A: This has been on the cards for a while. It has been talked about for at least one and half years and Microsoft while is a very successful company on the desktop software and service software front, has been broadly struggling on the internet side whether it is with MSN or with their search platform. So this is something that is really good for Microsoft. It gives them a terrific engineering capability, great set of services that are quite successful, whether it is email, IM, great team and a great brand
Q: Last year, Yahoo! at the start of the year, launched this new advertising platform called Panama. In fact, Microsoft CEO Steve Ballmer in his open letter to the board of directors of Yahoo! says, when we talked about this last year, you guys were very enthusiastic about Panama. One year down the line, it doesn’t seem to have made quite the impact. Is that a fair assessment or do you think it needs more time?
A: It is a fair assessment, if you take that 12 months have passed. Now, does it need more time? I would think so, because you are competing against Google, which is just a behemoth, and it is on all 12 cylinders and it is one of the fiercest competitors out there. So, I think this is good as well as bad for competition. It is good for competition because now someone can give Google a good run for its money, if Microsoft and Yahoo! combine their engineering forces, and marketing and so forth. But it also consolidates players, so in that sense you have one less major player. But there are huge challenges. It is not a slam-dunk for Microsoft and Yahoo!.
Q: One would argue that these are two massive companies with very different cultures. Do you think that would pose some problems for a merger?
A: Absolutely, integration here is the key. One is based in Redmond and the other is based in Silicon Valley. The two have very different cultures. One is a desktop software applications company. The other is a pure internet services company. It is not just a question of integrating teams and cultures, what do you do with the brands? Is it going to be Hotmail or Yahoo mail? What do you do with instant messenger and so on? So, there are a whole lot of naughty issues that are in no way easy to solve. It will probably take a fair bit of time, assuming that all this happens, for the integration to happen and for us to see results on the product front.
Q: Is this whole World Wide Web war becoming rest of the world versus Google because we have seen Microsoft taking a stake in Facebook as well? It seems everybody who has a competing product with Google is trying to line-up into one grand alliance?
A: It would appear that way. But one should also keep in mind that MySpace and Facebook showed up from nowhere. They were neither Yahoo! nor Microsoft nor Google. Facebook in particular was started by a couple of college students and now they are one of the most valued companies.
Q: Will there be any immediate impact on the Indian space? From a broader perspective, will this have ripples in India as well as far as the online advertising market is concerned?
A: Not in the near-term. MSN has not been very active compared to its peers like Yahoo! and Google. I don’t see a huge impact in a 6-12 months timeframe.