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Microsoft has been sniffing around Yahoo for the last 18 months, but the twain could never quite agree on a fair deal in private. Microsoft has made a $44.6bn takeover bid for Yahoo!.
“Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners,” Redmond’s press statement said today. Warning regulators that “if we don’t buy it, then Google will” is an interesting legal strategy, but is unlikely to win much support from competition regulators.
Steve Ballmer says that he sees the online advertising market doubling to $80 billion in two years, and he’d like a slice of that sweet, creamy pie. The less he has to share with Google, the better. Yahoo’s $7 billion in 2007 sales looks huge next to Microsoft’s online division producing $1.5 billion—but it’s less than half of Google’s $15 billion revenue take. If Yahoo! and Microsoft merge, their combined online ad operation still wouldn’t match the one headquartered in Mountain View. Google controls 60 per cent of the search market, and DoubleClick, which Google will buy as soon as regulators let it, is by far the dominant player in the display ad market.
If Yahoo! approves the proposed $44.6bn deal, the two regulators will sit down at the bargaining table to determine which one is better equipped to review it. Given Yahoo!’s recent performance – with both profits and share price on the slide – it seems a fair bet that plenty of shareholders will be tempted by Microsoft’s offer.