Last week saw the announcement of significant job losses across Yahoo! as shares slumped. This week, Microsoft has launched an audacious $44.6bn (£22.4bn) bid for its internet rival in a deal designed to create an online advertising powerhouse to rival market leader Google.
Microsoft, which came late to the internet advertising market, is offering Yahoo shareholders $31 a share in a combination of cash and its own stock. The deal would rank as one of the largest dotcom takeovers since AOL and Time Warner merged at the height of the tech stock boom
Microsoft reckons the global online advertising market will grow from over $40bn last year to nearly $80bn by 2010 and as the market grows, advertising platforms must consolidate to get the benefits of scale. Yahoo, for instance, was once the undisputed market leader in online search, but now controls just 17.7% of the US search market compared with Google's 56.3%
Analysts were split over the merits of the deal. One called the 62% premium "exorbitant", but others suggested it could help the markets shrug off the recent financial turmoil.
Internet advertising executives, meanwhile, welcomed the possibility of a stronger competitor to Google. "A Yahoo acquisition by Microsoft will improve competition in the European search market, which is overwhelmingly dominated by Google which has over 80% of the market in UK, France and Germany," said Andrew Walmsley, co-founder of London-based digital media agency i-level.
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