Microsoft has tabled a $44.6 billion bid for its rival, Yahoo, fully exposing Yahoo’s weakness to the world that the latter does not seem to have any hope of turning things around – especially after a rather bleak 2008 outlook and the decision to drop 1,000 employees from its payroll when February rolls around. Not a very pleasant Valentine’s Day then, eh? Yahoo has not jumped at the offer yet, since they decided that they will think about it. In a statement issued by the beleaguered dot com company, Yahoo mentioned that it would evaluate the offer “carefully and promptly in the context of Yahoo’s strategic plans.” There was no time frame given for a response, but surely it can’t be too long.

As it is, the $44.6 billion figure arrived with Microsoft offering $31 dollars a share – pretty generous considering that’s a 62% premium over Yahoo’s $19.18 closing price yesterday. This bid will include both cash and stock, and Microsoft has mentioned that Yahoo shareholders will be able to pick and choose what they wanted, with a 50-50 split being the most likely option. $44.6 billion is no joke even for a corporate giant like Microsoft, who’s most expensive acquisition to date was forking out $6 billion for aQuantive. One will also have to think about the integration risks that are very real – while Yahoo has way more traffic than Microsoft, the former have failed to monetized it. Also, don’t forget that Yahoo is working with Sansa by offering music selections on their site, which is a rival to Microsoft’s Zune so it will be pretty hard to see how things work out that way. In addition, you get Yahoo widgets on Apple’s iPhone, which again, Microsoft isn’t too bosom with.

I can only wonder what Google thinks of all this. Will the synergies of both Yahoo and Microsoft be enough to take on the behemoth at Mountain View, or will Microsoft’s ‘economy of scale’ strategy fail this time round? Heck, will Google even step in and make a bid of their own?

Source: Ruby on Rails