Microsoft Makes Offer For Yahoo

Last Thursday, I wrote a post titled "Yahoo Looks Ripe For A Deal" here.

In the article, I quoted a January 19th Wall Street Journal article, which had said:

For the right marauding investor, Yahoo looks like glistening treasure. Like all worthy plunder, it won't come without some effort. But for an activist hunting for a target, it looks like a pretty appealing start page.

Now--only eight days after my post--comes the news that Microsoft announced this morning it has made an offer to buy Yahoo for $44.6 billion in cash and stock.

According to Reuters, this would be the biggest Internet deal since the merger between Time Warner and AOL.

Yahoo's stock closed at $19.18 on Thursday. I just checked the pre-market price for this morning. The stock was at $29.56 as of 8:21 ET.

Microsoft's offer to buy was at $31 per share--a 62% premium over Thursday's close.

The Reuters story included a quote from Microsoft CEO Steve Ballmer:

"We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market . . ."

Yahoo did not immediately offer a comment.

Not everyone was impressed by the offer. Reuters quoted Tim Smalls of the brokerage firm Execution LLC:

"Shocking! To me, the premium seems exorbitant, for what is a dwindling business. I personally don't see how the synergies of Microsoft-Yahoo is going to take on Google . . ."

This is only the beginning. While the Yahoo shareholders might welcome seeing their stock in play, it's unlikely that the company's executives will regard this offer in a positive light.

Also, once a company goes into play, new players often enter the field.

It will be interesting to see how Google responds to this news.