MS to pit Yahoo! users against Google?

MS to pit Yahoo! users against Google?

If Yahoo accepts Microsoft's bid, the consolidated online search and advertising marketplace would witness an enhanced confrontation between the Redmond-based giant and Google, the present dominant player

Friday, February 01, 2008

CMN Bureau

BANGALORE, INDIA: The online search and advertising marketplace would witness an eyeball-to-eyeball battle between Microsoft and Google, if Yahoo! accepts the Microsoft offer.

Redmond-based Microsoft has offered to buy the Internet giant Yahoo! for an exorbitant price of $44.6 billion, 62 per cent higher than Yahoo's closing price on Thursday.

Microsoft's Kevin Johnson had gone on record saying that the combination of the two companies would create an entity that could better compete with Google, which dominates the online search and advertising market.

If Yahoo accepts the offer, analysts consider Microsoft could use the Yahoo users to counter the onslaught of Google in the online search and advertising market.

"The online-advertising business relies on scale," according to Chris Liddell, chief financial officer of Microsoft.

Yahoo has 23 per cent share in the US search advertising market, which is led by Google at 58 per cent.

This is the second time that Microsoft is trying to takeover Yahoo. In February 2007, Yahoo had turned down Microsoft's bid to initiate talks on a possible acquisition. It was then confident about the potential upside presented by the reorganization and operational activities that were being put in place.

Meanwhile in Nasdaq, Google Inc. shares were down 6.8 per cent (they were down over 9 per cent before the Microsoft/Yahoo! news). The largest search engine reported disappointing earnings on Thursday after the close.

Shares of Yahoo opened 51.2 per cent higher, as it was difficult to see another company bidding higher.

Microsoft opened 4.3 per cent lower.

If Microsoft's bid to takeover Yahoo succeeds, the marketplace would consolidate to a position where it would be just Microsoft vs. Google. Microsoft's bid is widely seen as a move to check the strong run of Google.

Yahoo has been struggling in recent years to compete with Google, which has also been a competitor to Microsoft.

Earlier on Tuesday, Yahoo had announced its plans to lay off 1,000 staff as part of a restructuring plan. Earlier this week it had cut its revenue forecasts. Yahoo said it would have to spend an additional $300 million this year in a bid to revive the company.

Microsoft, which employs more than 78,000 people in 105 countries, had revenues of $51 billion for the fiscal year ending June 2007.

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