Microsoft set to buy Yahoo?
Microsoft could be weighing up a takeover bid for search rivals Yahoo, according to fresh rumours circulating the web.
The spark for the latest round of Microsoft takeover speculation appears to have been Kevin Johnson, president of Microsoft’s Platforms and Services division, revealing the company’s ambitions to become one of the search industry’s top two players at the recent UBS Investor conference.
The plan, termed the “10, 20, 30, 40″ strategy, lays out Microsoft’s goals for achieving the following within 3-5 years:
- 10% of all Internet page views to be on MSN related websites (up from 6% currently)
- 20% of all time online to be spent at Microsoft websites (around 17% currently)
- 30% share of the online search market (currently at 10%, pretty much where they have been for the last few years)
- 40% share of all online advertising revenue (currently 6%)
The difficulty of reaching these targets in the proposed timescale, particularly a 30% share of the search market, has led to some analysts reaching the conclusion that the only way Microsoft could hope to meet them is by acquiring the 19% share of Yahoo.
Former Wall Street analyst, Henry Blodget, believes that aside from buying Yahoo, there is no alternative method for Microsoft to get anywhere near their targets.
“Buying Yahoo would give Microsoft 30% search share instantly. It would also boost Microsoft’s ad share close to that 40% goal.” says Blodget.
In their continued efforts to build share in the online search market it is not the first time that Microsoft have been linked with a move for Yahoo; in 2006 there was talk of a bid valuing Yahoo at $80 billion - a significant investment even for a company with Microsoft’s capital. In 2003, it seems an apparent bid for Google was rejected, the Mountain View search giants then valued at a bargain $15 billion.
According to Blodget, Microsoft are losing a billion dollars a year trying unsuccessfully to boost their slice of the action in this area, and could now be willing to make the kind of large investment that might reverse their fortunes.
There are indications that many investors share Blodget’s conclusions that a takeover could be imminent; Microsoft’s announcement of their “10, 20, 30, 40″ strategy at the UBS conference was followed by 6% climb in Yahoo’s share price.
Neither Microsoft nor Yahoo have made any comment on the rumours.
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