Microsoft Is Going After Yahoo! -- New York Post

The New York Post says Microsoft has asked internet giant Yahoo! to enter formal merger negotiations. The Post says the two have had informal talks over the years, but stung by Google's acquisition of internet advertising firm DoubleClick, Microsoft's proposal has taken on a new sense of urgency. "They're getting tired of being left at the altar," said one source who has talked with Microsoft. The Post's sources put a $50 billion price tag on the deal, a 24% premium over Yahoo's current $38b market cap. A combined company would command a 27% market share in internet search (vs. Google's 65%) and would narrow the gap in overall online ads to just 13%. More importantly, a source said, a merger would create "the dominant force on the internet" in terms of overall content. MSN with its news focus tends to draw a more mature crowd, while Yahoo! focuses on the younger demographic. Besides potential cost savings, a deal might also open opportunities to provide exclusive Yahoo! content on Microsoft devices such as Zune and Xbox. Sources say Microsoft is working with Goldman Sachs. Yahoo shares are up 20% to $34.75 in pre-market trading while Microsoft shares are down 1.2% to $30.60.

Sources: New York Post
Commentary: Wouldn't It Be Crazy If This Happened? • Yahoo !/AOL Merger Implications for Google • Microsoft's Web Prosperity is Forever Just Around the Corner • Yahoo: The Overvalued, But Core, Internet Holding
Stocks/ETFs to watch: Microsoft Corp. (MSFT), Yahoo! Inc. (YHOO). Competitors: Google Inc. (GOOG), Time Warner Inc. (TWX)
Conference call transcript: Microsoft F3Q07 Earnings Call Transcript, Yahoo! Q1 2007 Earnings Call Transcript

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