Chowrangi

Announcing what can be the biggest news of 2008 so far, Microsoft proposed $31 per share for Yahoo acquisition. The transaction, if materialized, is valued at approximately $44.6 billion in cash and stock; provides 62 percent premium (above closing price on January 31, 2008) for Yahoo shareholders.

In a letter to Yahoo’s Board of Directors, Steve Ballmer, Chief Executive Officer of Microsoft, writes:

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!’s shareholders. Microsoft has generated revenue growth of 15%, earnings growth of 26%, and a return on equity of 35% on average for the last three years. Microsoft’s share price has generated shareholder returns of 8% during the last one year period and 28% during the last three year period, significantly outperforming the S&P 500.

Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers.

The offer was disclosed a day after Terry Semel, Yahoo!’s non-executive Chairman, stepped down from the Board of Directors and Roy Bostock, who has been a member of Yahoo!’s Board since May 2003, was unanimously elected by the Board to serve as Yahoo!’s non-executive Chairman.

Clearly, this is another attempt by Microsoft to strengthen its position against Google in search engine and web based advertisement market. The ultimate beneficiaries, however, will be web-publishers and advertisers as both Google and Microsoft-Yahoo will try to expand their market share by offering lucrative deals to both sides of the table.

Image: MicroHoo by Mashable

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