Microsoft bids for Yahoo

Redmond makes hostile multi-billion dollar offer for search giant

Microsoft has launched an audacious bid to land web search and internet portal giant Yahoo with a $44.6 billion offer.

The move came on the back of poor financial performance from Yahoo which has seen the firm's shares lose around 40 per cent of their value in the last three months. The announcement immediately boosted Yahoo shares by 55 per cent.

Any potential deal is likely to boost Microsoft's web search capabilities, an area it has traditionally lagged in behind Google and Yahoo, and would come hard on the back of its recent deal to acquire enterprise search vendor Fast.

It would also give Microsoft a bigger chunk of the lucrative search advertising market, which Yahoo has invested heavily in with the recent launch of its Panama platform.

Neil Morgan of web analytics firm Omnituresaid the news shows that "the old order have finally grasped the significance of the internet".

"Following other acquisitions by Microsoft and Google of Acquantive and Doubleclick respectively, what this really means to advertisers is a significant reduction in choice of online media," he added.

Colin Hadden, UK manager for enterprise search vendor Sinequa said the news has again highlighted the commercial importance of search in the enterprise technology market.

"It's also an admission by Microsoft that despite its best efforts it doesn't have the skills and the talent to build the technology or break into the market, " he added. "Fast gives them the technology and this potential Yahoo deal should accelerate the brand from a search perspective."

However, the move may create significant problems for Microsoft, according to Gartner analyst, Andrew Frank. "Although the synergies between the two companies, which Microsoft asserts are worth at least $1 billion a year, are certainly great, the merger also raises the question of how they'll be able to continue operating during their integration," he wrote in a research note. “Antitrust laws are also a concern with any deal of this size. While the current U.S. administration is less likely to pose a problem, in recent years the European Union has aggressively policed similar mergers.”