Yahoo & Microsoft?Saunders-45X64.JPG
Posted by Alec Saunders

If you didn't believe that it was a new era at Microsoft before today, Steve Ballmer's proposed $44.6 billion acquisition of Yahoo! will probably change your mind. Never before in the history of the company have they tried to acquire and digest something so large. With the goal of taking on Google, Microsoft has publicly offered a 62% premium to Yahoo! shareholders. If they're successful in their bid, Microsoft will acquire one of the oldest Internet names and a grab bag of other properties, including some undeniably great brands like Flickr. I've just listened in on the call with Kevin Johnson, Ray Ozzie and Steve Ballmer. Ballmer began with some basic positioning. This is the next major milestone in Microsoft's company transformation to embrace the online services platform and search and advertising. Discussion have been underway for the last last 18 months. Ballmer called Yang last night, and let him know what they were planning to do. Johnson then walked through key reasons for the acquisition. He began by positioning this deal in the context of the direction laid out at last summer's financial analysts meeting, pointing out the successes that Microsoft had experienced executing on that direction so far. He said that there are really two key dynamics in the online advertising business: scale economics in search and ad serving, and scale economics in capital expenditure. He noted that the industry would be better served with more competition, and that is increasingly dominated by large players. Click here to read more of Alec's blog.

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