Microsoft is making a bold move that will stir up the War for Internet Ad Dollars it is fighting with Google. They made an unsolicited takeover offer of $44.6 billion for Yahoo!, the beaten up Internet icon.

http://biz.yahoo.com/

Is this more bad news for Google, that just failed to meet expecations and is down another 10% today?

It's interesting how MSFT is down over 6% with the announcement. I guess investors just don't have much confidence in Yahoo!'s future, and are happy for an attractive exit.

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tonyleachsf, Zecco Associate

I particularly liked Paul Kedrosky's take - from http://paul.kedrosky.com/

- Microsoft claims a billion-dollars in synergies from scale,
operational inefficiencies, etc. Let's be charitable and say half of
that will come from layoffs. That works out to roughly 3,000 people, or
even a little more, depending on how you count costs.

- Early this morning Goldman made an awfully timely call, putting out an
analyst note at 3:56am PST suggesting that Microsoft should buy Yahoo
-- only to freeze analyst coverage of Microsoft at 6:55 AM PST on the
news that Microsoft has offered to buy Yahoo and it is providing
i-banking support. Yay! Boo! Yay! Or something.

- While the deal has to happen, I'm still not convinced that giving the combined
companies a larger search presence is linear (or even geometric)
improvement in MicroYoo's attractiveness to advertisers, as some argue.
My sense is that most people use Google because they like it and it
works, not because they can't find Microsoft or Yahoo's comparable service.

- This is good news for Google, of course. It gives the
company carte blanche for other large acquisitions, if needed, and,
more importantly, it means that two elephants will be busily mating out
back so that it can march merrily in the confusion to further share
gains in both search and advertising.

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tonyleachsf, Zecco Associate

Well, bidders hardly get praise from investors. They ususally dip on news like this. Plus, economic research shows that most takeovers actually do not create any shareholder value.

Looks like Google won't let Microsoft get away with this one so easily:

http://www.nytimes.com/

Apparently, they are using a wide range of weapons to torpedo the deal. Personally, I like this one:

"several Google executives made back-channel calls over the weekend to allies at companies like Time Warner, which owns AOL, to inquire whether they planned to pursue a rival offer and how they could assist, these people said. Google owns 5 percent of AOL."

The big boys are playing chess and stakes are high...

Actually, if I were a Google exec, I'd be laughing at MS. 31 bucks a share? Damn, wish I'd had some YHOO before this was announced though.

Although MS is a good profitable company, hoary old Yahoo ain't gonna help them put a dent in Google. This looks like a knee-jerk reaction to me.

Glad I exchanged my MS shares for Apple a few days ago.

MSFT is dipping because investors see that it's going to hurt the short term bottom line for the company. As a Google and former Yahoo ad customer it all boils down to where is the best place to spend your ad dollars and who is has the most customer friendly site. After a months of using both it was VERY clear that Google had the easiest to use setup. So easy my 5 year old can set up ads for us. Yahoo on the other hand is so complicated it's not worth it. Google is the better brand because it stayed focused on it's business where Yahoo went a stray and got into everything. MSFT should buy Apple or Sprint. I just don't see the value in buying Yahoo. I guess only time will tell.

I bought Microsoft on the 6% dip.... (half position, will double down if MSFT goes to around 27) Yahoo is a great brand, but poorly run. I figure microsoft can get value out of it.

Anyone buying on the news that yahoo will turn down Microsoft? I am trying to get out of some other possitions to buy on the (rumored) 50% drop on Monday, to turn and sell when Microsoft comes back with a higher bid. Normally I am a long term player but I can't pass up this easy $ in a month or so.

Wow... is yahoo foolish or will they actually get more money.

I'm going with foolish....

No way out for Yahoo. If they turn down the bid, stock will be tanking to the low $ 20s. They can't compete with Google, they can't resist Microsoft's offer. What is on their minds? Do you think with their current improvement, Jerry Yang can turnaround Yahoo stock to above Microsoft's offer within 1-2 years? I don't think so. What is best for Yahoo is to sell out and if Yang really wants to run a company, then make a new company that competes with Yahoo/Microsoft.

I bought msft on the belief that yahoo will botch it up. The deal falls through and microsoft goes back up.

jeff_b_2007:

I bought msft on the belief that yahoo will botch it up. The deal falls through and microsoft goes back up.

If you bought at 28, then you're up 12% in one month :-)

I cant wait to see the stock of both companies on Monday.  Msft sweeted the bid to 33/share, then decided to walk away.  Yhoo's board is going to have some questions to answer at their shareholder meeting..  Personally I think that MSFT will try to pick YHOO up again in the future after their stock goes back down into the teens. 

http://www.cnbc.com/id/24445884