Microsoft offers to buy Yahoo in $44.6 billion deal

It’s been rumored on and off for years now, but Microsoft just made an unsolicited $44.6 billion bid for Yahoo. The bid, which would consist of cash and Microsoft stock, values Yahoo shares at $31 a share, a 62% premium on Thursdays closing price. More analysis here. Yahoo has rebuffed Microsoft in the past, but this time the offer might be one they can’t refuse. The price of YHOO stock after the announcement indicates the market thinks there is a high probability of a deal. This deal is clearly about Microsoft not being able to compete with Google, and not being too happy about that. Ironically, I don’t think this deal will help them compete any better. On the other hand, Yahoo has been a huge friend to Open Source. In addition to things like YUI (which we use at LQ) and Hadoop, they acquired a great company in Zimbra. To me, Zimbra is one of the only real long term threats to Exchange. Unfortunately, I’m not quite as optimistic as Matt about the future of some of these Open Source initiatives if Microsoft were to take over. I’m not sure companies like Flickr, del.icio.us, MyBlogLog, Zimbra and others would have sold to Microsoft… and for good reason. The cultures at Yahoo! and Microsoft are just entirely different. Concerns like that sometimes go out the windows when $44B is on the table though. Long term, I think Yahoo could probably offer more shareholder value alone than as part of Microsoft. The market doesn’t really think long term anymore, however, and in the short term Yahoo is hurting.

–jeremy

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