Redmond, Wash. — In an effort to stave off Google’s total domination of the online advertising space, Microsoft today offered to purchase Yahoo! for an estimated $44.6 billion.
The acquisition offer is a direct result of Yahoo!’s rejection in February 2007 of a Microsoft proposal that would have aligned the two companies in an effort to better compete online. Microsoft said it now believes the time for such an informal alliance is past and the only way forward is a formal merger of the two companies.
In a letter to Yahoo!’s board of directors, Microsoft CEO Steve Ballmer said, “Microsoft’s consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers.”
Yahoo! issued a press release stating its board of directors would study the proposal and pursue the best course of action for its shareholders.
Several Microsoft execs said the deal would help offset Google’s domination of the industry.
“The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. 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.”
Microsoft said its plan for any combined company includes utilizing Yahoo!’s staff and Microsoft would “offer significant retention packages to Yahoo! engineers, key leaders and employees across all disciplines.”
Ballmer did not set a date or deadline in the letter for Yahoo!’s board to respond to the offer.