Microsoft has offered to buy the search engine company Yahoo for $44.6bn (£22.4bn) in cash and shares.
The offer, contained in a letter to Yahoo’s board, is 62% above Yahoo’s closing share price on Thursday.
Yahoo cut its revenue forecasts earlier this week and said it would have to spend an additional $300m this year trying to revive the company.
It has been struggling in recent years to compete with Google, which has also been a competitor to Microsoft.
“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,” Microsoft chief executive Steve Ballmer said.
Chairman quit
There has not yet been any comment from Yahoo.
Its chief executive, Jerry Yang, announced on Tuesday that he intended to lay off 1,000 staff as part of a restructuring plan.
Terry Semel, who stepped down as chief executive last June, also quit as non-executive chairman on Thursday.
Microsoft said that Yahoo shareholders could choose to receive either cash or shares.
Yahoo shares have fallen 46% since reaching a year-high of $34.08 in October. They rose 54% in pre-market trading.
“Ultimately this corporate marriage was forced by the rise of Google, which has grown into a serious competitor for both Microsoft as a software company and Yahoo as an internet portal,” said Tim Weber, business editor of the BBC News website.
“It is a shotgun marriage, but the person holding the shotgun is Google.”
‘Exorbitant premium’
According to its letter to Yahoo, Microsoft attempted to enter talks about a deal a year ago, but was rebuffed because Yahoo was confident about the “potential upside” presented by the reorganisation and operational activities that were being put in place at the time.
“A year has gone by, and the competitive situation has not improved,” Microsoft’s letter said.
But there has been some concern about the price that Microsoft is offering.
“To me, the premium seems exorbitant, for what is a dwindling business,” said Tim Smalls from the brokerage firm Execution LLC.
“I personally don’t see how the synergies of Microsoft-Yahoo is going to take on Google.”
Other analysts were more enthusiastic about the offer.
“It is a fantastic offer. It is game on,” said Colin Gillis from Canaccord Adams.
“This consolidates the marketplace down to Google versus Microsoft. These two companies will be going head to head.”
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AOL said on Wednesday it would buy Internet advertising technology company Quigo to bolster its ad force and make it more competitive with Google Inc and Yahoo Inc.
A source familiar with the matter said the purchase price was about $340 million. AOL, a unit of Time Warner Inc, did not disclose financial terms.
The deal, which adds 100 employees, marks the last big acquisition AOL plans as part of a restructuring to transform itself into a one-stop online advertising shop, AOL Chief Executive Randy Falco told Reuters in an interview.
“I expect it to begin to add to growth in 2008,” he said, referring to AOL’s online advertising growth, which is a big concern among investors. Ad growth slipped to 16 percent in the second quarter and 13 percent in the third quarter, from 40 percent levels earlier.
Quigo, which signed a deal with Time Inc in June and has more than 500 publisher relationships, is an Internet ad-targeting company that lets advertisers buy sponsored listings, much like Google’s AdSense, based on keywords or subjects.
Advertisers have little say on where Google places their ads, but Quigo’s AdSonar product lets advertisers place their ads on specific Web pages, including pages featuring topics or keywords such as “mutual funds” or “health and science.”
The Quigo system also lets publishers control their relationship with advertisers, rather than surrender control to a middleman like Google.
Quigo gives AOL “access to a ton of relationships with a ton of premium publishers, thousands of advertisers and unique technologies,” Quigo CEO Michael Yavonditte told Reuters. Quigo has deals with TheStreet.com, News Corp’s FoxNews.com, and Walt Disney Co’s ESPN.com, among others.
SPIN-OFF?
The deal will add to Time Warner’s growing roster of online ad technology firms.
AOL restructured its advertising business in September, consolidating into one division ad network Advertising.com; Tacoda, which targets users based on their habits; wireless ad network Third Screen Media; video ads company Lightningcast; and ADTECH, a global ad-serving company.
Some investors have called on Time Warner to spin off all or part of AOL, with expectations growing after Jeffrey Bewkes was named earlier this week to succeed Time Warner Chief Executive Richard Parsons on January 1.
Asked what he thought Time Warner’s view on AOL was, Falco said, “They just showed how they feel about our potential by supporting another big acquisition for us.”
The success of AOL is seen as critical to Time Warner’s sluggish stock price. The stock rose 1 percent to $18.54 following its third-quarter earnings report on Wednesday, which largely met Wall Street expectations.
“AOL is picking up leading technologies — the premier names and smart people,” said Stan Sandberg, principal at boutique investment bank Gridley & Co LLC, which specializes in interactive marketing and digital media. Sandberg spoke on Tuesday ahead of the announcement on Quigo.
Sandberg added, “Now that it will be consolidated under Platform A, they really are positioned beautifully to being the leading advertising technology company.”
The deal for Quigo comes amid a buying frenzy in the interactive advertising market and follows Google’s $3.1 billion pact to buy DoubleClick and Microsoft Corp’s $6 billion agreement to buy aQuantive Inc.
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McAfee announced plans on Tuesday to acquire ScanAlert in deal worth approximately $51 million in cash.
And what is McAfee looking to get for its money? For starters, it’ll snap up ScanAlert’s Hacker Safe Web site security certification service, bolster its own SiteAdvisor security-rating system, and become the keeper of ScanAlert’s proverbial “good housekeeping” seal for sites seeking to reassure customers that they are conducting safe online transactions.
The acquisition, expected to close in the first quarter, calls for integrating ScanAlert’s e-commerce security certification service into McAfee’s SiteAdvisor system. McAfee last year acquired SiteAdvisor, which informs users about the safety of their returned search results, estimating the likelihood that a site could potentially infect their computer with spyware, spam, or a browser attack.
ScanAlert issues a Hacker Safe certification to Web sites that have undergone its scanning service for vulnerabilities, as well as demonstrating that they have been fixed. The sites also need to undergo daily scans by ScanAlert, in order to maintain their Hacker Safe stamp of approval.
The Hacker Safe certification will be visible through SiteAdvisor, once the acquisition is completed, and the technologies are integrated.
Security fears have resulted in consumers delaying their online-shopping decisions and transactions by more than half a day, according to ScanAlert’s own research.
Those concerns are nothing new. Two years ago, a fourth of online shoppers reduced their purchases, as fear over identity theft soared, according to a report by RSA Security.
E-commerce site operators, as a result, have been particularly interested in trying various techniques to boost the security of their sites.
As part of the McAfee deal, ScanAlert may see its overall acquisition price jump by another $24 million, should it hit certain performance targets.
The company has 8,000 customers, who represent more than 75,000 Web sites. Those customers include Toshiba, Warner Bros., and the American Red Cross.
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