Microsoft offers US$44.6 billion to buy Yahoo

The offer of 31 dollars per share for Yahoo represents a 62-per-cent premium on the internet company's Thursday closing price. Yahoo acknowledged receiving the unsolicited bid and said its board of directors would be considering it carefully.

Microsoft, producer of the Windows computer operating system, and Yahoo have been unable to catch up with market leader Google and make inroads into the internet advertising business. Yahoo said Tuesday that it was cutting some 1,000 jobs amid a decline in profits in 2007.

Yahoo shares were up nearly 50 per cent in morning trading on Wall Street Friday as news of the potential deal reached investors. Microsoft shares dropped more than 5 per cent.

According to previous reports, Microsoft and Yahoo have been in talks about a possible cooperation and even merger for more than a year, but Yahoo has refused the proposal. The official offer by Microsoft will likely place more pressure on struggling Yahoo's board and shareholders.

Yahoo in a statement said its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."

Google on Thursday announced a sharp rise in profits, though not as strong as expected by analysts. Google has been expanding massively from the search engine and advertising business into new arenas to place its income on a wider, more solid footing.

"We have great respect for Yahoo," said Steve Ballmer, chief executive officer of Microsoft, "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's consistent belief has been that the combination of Microsoft and Yahoo clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers," Ballmer added.

The sale could be finalized in the second half of the year, though Yahoo shareholders still have to approve the deal. Microsoft said it expects cost savings of at least 1 billion dollars.

Microsoft said Yahoo shareholders could have a choice between a cash payment and Microsoft shares.

In a letter to the Yahoo board, Microsoft stipulated that the cash-share offer was "subject to pro-ration so that in the aggregate one-half of the Yahoo common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo common shares will be converted into the right to receive cash."

Deutsche Presse-Agentur