The web is afire with the news that after its latest bid attempt to takeover Yahoo failed, Microsoft decided to back down. My desktop news widget is going wild with this news... updating every 30s or so with more updates from Wall Street Journal, CNN Money, Forbes, Information Week, CNet News, etc; hot news indeed. All those big time journals aside it appears that BoomTown's Kara Swisher was the first to break the news.
Mr. Jerry Yang CEO and Chief Yahoo Yahoo Inc. 701 First Avenue Sunnyvale, CA 94089
Dear Jerry:
After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo.
I first want to convey my personal thanks to you, your management team, and Yahoo's Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.
I am disappointed that Yahoo has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.
In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.
Also, after giving this week's conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition for Microsoft.
We regard with particular concern your apparent planning to respond to a "hostile" bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us for a number of reasons:
-- First, it would fundamentally undermine Yahoo's own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.
-- Given this, it would impair Yahoo's ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.
-- In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.
-- This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.
-- It could foreclose any chance of a combination with any other search provider that is not already relying on Google's search services.
Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft's proposal to acquire Yahoo.
We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.
I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.
But clearly a deal is not to be.
Thank you again for the time we have spent together discussing this.
Steven A. Ballmer Chief Executive Officer Microsoft Corporation
Yahoo's Reply Yahoo's Chairman Roy Bostock issued a public statement that included some jubilant words from Jerry Yang about the "distraction of Microsoft's unsolicited bid":
"We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo! for success and leadership in its markets. From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view. Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making. Today, Yahoo! has:
-- a refined strategic focus to drive enhanced volume and yield;
-- reorganized to focus its efforts on its most promising products and services;
-- invested in innovations designed to revolutionize display advertising and facilitate closing the competitive gap in search; and
-- enhanced expense and resource management to support improved profitability."
Jerry Yang, co-founder and chief executive officer, Yahoo! Inc. added, "I am incredibly proud of the way our team has come together over the last three months. This process has underscored our unique and valuable strategic position. With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users."
BONUS - Ballmer's Internal Memo to Microsoft I came across this article at CNet a few minutes ago showing a copy of Steve Ballmer's internatl memo to Microsoft staff and felt it was worth including:
From: Steve Ballmer Sent: Saturday, May 03, 2008 5:18 PM To: Microsoft - All Employees (QBDG) Subject: Withdrawal of Offer to Acquire Yahoo!
This afternoon I sent the attached letter to Jerry Yang announcing that Microsoft has withdrawn its proposal to acquire Yahoo. We proposed the deal in the belief that a Microsoft-Yahoo merger would create a combined company with the resources and assets to win in the fast-growing market for advertising and online services.
Although the acquisition of Yahoo would have accelerated our ability to deliver on our strategy in advertising and online services, I remain confident that we can achieve our goals without Yahoo. We have a strategy in place to do so and we will continue to expand on this strategy and accelerate our progress.
Our strategy has three components:
Deliver on the basics. We will continue to improve search relevance and build out our ad platform.
Change the game through innovation. We will expand investments in engineering and deliver transformative tools and Web experiences.
Expand our global scale and focus. We will pursue partnerships and investments to realize the competitive advantages that come with scale.
At the heart of our strategy is a commitment to bring the benefits of competition, choice, and innovation to everyone who uses the Internet--from consumers to content creators to advertisers.
We are 100 percent focused on executing on this strategy and we have made good progress in a very short time. We've improved search relevance dramatically, introduced compelling new search verticals, successfully integrated Aquantive, and added nearly 100 new publishers to our ad platform. In the last couple of months we've rolled out new versions of key products including Internet Explorer and Silverlight, and introduced new technologies like Live Mesh. We now have over 430 million active users of our Windows Live services worldwide. And we continue to add new technologies with acquisitions such as YaData, which brings leading-edge behavioral targeting technology, and Caligari, which gives us advanced 3D modeling capabilities that will help us continue to improve Virtual Earth.
Ultimately, our goal is to build the industry-leading business in search, online advertising, media, and social networking.
We are absolutely committed to being the leader in each of these areas. Now is the time to do what we have always done best--be tenacious, focus on the long term, innovate, and keep working hard.
I want to thank all of you for your patience during this process and for your dedication and hard work across all of our businesses. We asked that you remain focused on our goals through these cycles, and you have done this extremely well. We are committed to making the investments that will enable us to compete and, ultimately, lead in the online services and advertising businesses. Together, I know we will succeed.
Steve
Oh Well Too bad, I had really hoped this merger would go through for entirely self serving reasons noted previously. That said, huge huge kudos are due to Jerry Yang and his impressive team. I have to wonder just how much sleep they managed to get over the past 3 months since Ballmer's 'unsolicited' kick in the teeth; they have been busier than a one-legged man in an arse kicking contest. Here is a rundown (I plan on updating it soon to bring it up to date) on what Yahoo was up to for only part of that 3 month process... it is a long list.
Written by Scott Van Achte and published at 1:35 PM
Search Engine Roundtable reported Tuesday that Microsoft Live Search, in an effort to "loosen up the spam filter", has seen a major update. Over at WebmasterWorld however many are annoyed at the apparent level of poor results.
'caveman', one of the moderators at WebmasterWorld, made the comment "the net result has been more pages from iffy, third tier sites ranking than I have seen in long while"
If across the board results will continue to be of lower quality, it would not be surprising to see Microsoft roll back the update - either that or watch their market share dip even lower into the single digits; a loss they can't afford to take.
On Feb 28th at SMX West I was fortunate to spend some time with Jeremiah Andrick, Program Manager of Live Search Webmaster Center. To start I let Jeremiah give an introduction to Live Webmaster Tools and soon after we began discussing some of the latest additions to the tools and he gave an inkling that some major stuff is coming down the line. I hope you enjoy the interview because I had a lot of fun doing it. Microsoft is very lucky to have a talented down-to-earth guy like Jeremiah on the team. I am surely going to hit him up for more interviews in the future but he won't get off quite so easily... I will have more pointed questions next time around ;-) This, however, is a great introduction to Jeremiah and the tools that Live Search Webmaster Center provides.
Over the past week I have been keeping the StepForth SEO Blog updated on the events focused on Microsoft's attempted acquisition of Yahoo and the fall out since. This is becoming quite a debacle so I thought a little chronological update on how all this went down might be useful.
From 2006 to Now
2006: Rumors abounded that Yahoo and Microsoft were in talks about working together and that an acquisition was possible. However, nothing substantial was revealed at the time but we later learned that Yahoo refused to work with Microsoft.
May 4th, 2007: The rumor mill was working overtime that Microsoft was quietly trying to acquire Yahoo for $50 billion. I was elated :-)
Jan 22, 2008: The New York Times reports that Yahoo is expected to layoff hundreds of staff in order to boost profitability and share prices. The quarterly earnings report is eagerly anticipated on Jan 29th.
Feb 3, 2008:Google's David Drummond weighs in on the hostile bid by Microsoft citing concerns that a potential purchase of Yahoo by Microsoft "raises troubling questions". He goes on to ask "Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet?" Check out this hilarious interpretation of Mr. Drummond's blog posting by Kara Swisher.
Feb 11, 2008:Microsoft promptly responds to Yahoo's rebuff with a 'gloves are off' tone. In the letter Microsoft says it will "ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal."
Feb 12, 2008: Yahoo exec Bradley Horowitz leaves Yahoo and moves to Google. Bradley was head of Yahoo's Advanced Technology Division and his departure is only the beginning of a long list of talent that is likely to leave Yahoo over the coming months. See Bradley's bio and you will see why this respected man's departure will hurt. To his credit, however, Bradley insists his departure was not directly due to recent events.
Feb 13, 2008:Yahoo announces an acquisition of online video company Maven Networks. Why? "Video is projected to be the fastest growing segment of the online ad market, and Maven will significantly help advance Yahoo's strategy, expanding the video opportunity for publishers and increasing the efficiency and effectiveness for advertisers."
Sniff... sniff... I smell desperation! This is yet another rallying cry from Jerry Yang to help keep Yahoo from the slobbering jaws of Microsoft... unless of course Microsoft offers $35 or $36 a share at which point OKAY.
So What Now? First of all, forget about Google saving the day. I would put money on Google being out of the picture for any possible partnership with Yahoo; Google is just not interested in the certain SEC ramifications of such a partnership.
With that potential path closed Yahoo has had to look elsewhere. As a result there are rumours that News Corp and Yahoo are talking in an attempt to forge a deal that could counter Microsoft's.
Meanwhile Yahoo is facing pressure from all sides to make a move that appeases the company's particularly distressed shareholders and they had better do something soon. Otherwise, (this is hard to believe) matters could actually get uglier.
Feel free to republish this article under the following conditions: the posting must credit the author (Ross Dunn) before it begins and it should include a permalink back to this original posting (without a nofollow). Thank you.
Microsoft released the following official statement today in response to Yahoo's denial of the $44 bn dollar offer and I highlighted Microsoft's fully-expected overture towards a hostile takeover:
It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.
We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.
A Microsoft-Yahoo! combination will create a more effective company that would provide greater value and service to our customers. Furthermore, the combination will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising.
The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.
The nastiness is about to begin as Microsoft is likely to launch its first publicly hostile takeover of another company.
Over the weekend Bloomberg reports that Yahoo's board decided to reject Microsoft's offer of $44 bn because they felt their stock was substantially undervalued but they hinted they could be drawn back to the table with a more alluring offer.
"The board spent a week reviewing the $31-per-share offer before deciding it was too low. The statement didn't give a counter-proposal for the price. Yahoo wants at least $40, the Wall Street Journal reported this weekend." (source Bloomberg exclusive)
Yahoo appears to be trying to save face since the offer Microsoft provided was given during a slump in their stock. It all smelled like a quasi-hostile takeover... after all, Yahoo shareholder's could not have been too happy with the web giant's declining value. That said, Yahoo CEO and Founder Jerry Yang is very protective of his baby and if he is going to sell out I am sure it will have to be for a price that he knows he can't say no to.
Unfortunately Jerry Yang may not have a choice. According to a follow up article from Bloomberg, Microsoft may take the straight and undeniably hostile route and contact shareholders directly in order to influence the decision. According to Bloomber the letter of offer to Yahoo threatened the following:
"Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal.''
Now that is considered a subtle threat... right? Haha, I think not. I expect Jerry Yang is not a happy camper right now and I can't say I would either in his position. He obviously does not want to sell his baby but that is the sad catch-22 of having a public company; you may have a lot of money to play with but it isn't all yours and the shareholders have power.
I am very intrigued to see how this pans out. Will Microsoft make it's first ever public hostile takeover? How long will Jerry Yang hang on and how far will he go to keep it?
Below I have posted a graph from Alexa.com showing the past 5 years of "REACH" that the top search engines have experienced: Yahoo.com (in Blue), Google.com, Live.com (Microsoft), MSN.com (Microsoft), Ask.com. The chart serves to illustrate one very important fact that is easy to forget; Yahoo is still ahead of Google when calculating sheer reach. Yahoo simply isn't performing as well as the markets expect which is why stocks are plummeting and layoffs are occuring. This is partially why I think Jerry Yang is so resistant to the buyout - he still sees so much potential (real or imagined).
Written by Scott Van Achte and published at 3:23 PM
The rumors have been flying around for some time now over whether or not Microsoft will put in an offer for search Giant Yahoo. Many have speculated over the past few months as to if Microsoft would try for an acquisition, and if so, how much was it worth to them.
This morning all speculation came to an end when Microsoft unexpectantly waved $44.6 Billion under Yahoo’s nose. Shortly after the announcement Yahoo Shares rose sharply by more than 50%, while Google shares took another 8% drop down to 515.90 by close of day Friday.
The latest acquisition attempt, and what would be one of the largest in history, would put Microsoft in a position to actually compete with distant leader Google.
In a conference call this morning Microsoft Chief Executive Steve Ballmer stated:
“This is a decision we have – and I have – thought long and hard about,” Ballmer said. “We are confident it's the right path for Microsoft and Yahoo.”
Last year Microsoft purchased online ad service aQuantive for a stagger $6 Billion – petty cash compared the offer currently on the table for Yahoo.
Last year Microsoft was negotiating to purchase yahoo (see Microsoft Buy Yahoo? Yes Please!) And at that time the Wall Street Journal had estimated Yahoo’s value at around $50 Billion.
Will the deal go though this time? It would certainly stir things up and make life a little more interesting for us SEO folks – If the past is any indication of the future, then this deal may just fizzle out, but with Yahoos recent layoff announcement, and lower than expected fourth quarter earnings, this just may be there way out.
(on a completely “conspiracy theory” type level, perhaps Yahoo just paid off Microsoft under the table to stage a fake offer in order to drive Yahoo shares up? Do I believe this – well no, but I was recently reading about some famous historical publicity stunts, so this theory came to mind and I wanted to share it)
Mike McDonald of WebProNews conducted a great, very informative interview with Live Webmaster Tool's Product Manager, Jeremiah Andrick.
Jeremiah discusses paid links, cloaking, the backlink function at Live Search and my special favorite - the incident where Adwords ads got indexed. Check it out, I think you will appreciate the frankness of Jeremiah's answers. You can certainly tell that Microsoft has finally figured out that Webmasters need to feel the love.
Special thanks to Barry Schwartz and the SE Round Table for recommending this video. I am glad I fit it into my busy day.
The search world appears to have renewed its interest in Microsoft's potential in the search industry since the company reportedly put in an offer to acquire Norwegian search company Fast Search for 1.23 billion.
So why all the hullaballoo? Well, Microsoft's Live Search has some good technology behind it but it has not exactly impressed those that want highly relevant search. The acquisition of FAST search technology, however, would provide Microsoft with an infusion of established processes light years more developed than its own.
Written by Scott Van Achte and published at 2:17 PM
In an effort to compete with Google Maps and Google Earth, and to capture the traffic of one of the UK's most visited websites, Microsoft has purchased online mapping service Multimap for an undisclosed sum.
According to a press release issued by Multimap on Dec 12, "Multimap will operate as a wholly owned subsidiary of Microsoft as part of the Visual Earth and Search teams in the Online Services Group."
"The addition of Multimap enhances Microsoft's position as a leading provider of mapping and location platform services," said Sharon Baylay, general manager of the Online Services Group at Microsoft. "This acquisition will play a significant role in the future growth of our search business and presents a huge opportunity to expand our platform business beyond the U.K. and globally. We are thrilled to welcome Multimap onboard."
Multimap is among of the UK's top 100 tech companies, and is one of the leading online mapping services. Their services include street-level maps, road maps, door-to-door travel directions, aerial photos, and links to location information and services.
Wallstrip published a great newscast heralding, with some disbelief, that Microsoft's stocks had just reached a 5 year high. The video is worth the watch and I followed it up with my less than glowing opinion on the mega-corporation's current path.
So according to stocks Microsoft is doing quite well and it is apparent that part of that success is a result of their high sales of Vista. Unfortunately for Microsoft, I can say with relative certainty that a significant percentage of Vista sales were forced upon new PC buyers and many would switch back to XP if they had a chance. In fact Dell even switched back to offering XP products after they received a myriad of complaints that Vista-only PCs were becoming the norm.
Additionally, Computer World UK posted an interesting article that cited "most IT professionals are worried about Vista and that 44% have considered non-Windows operating systems, such as Linux and Macintosh, to avoid the Microsoft migration."
In short, it seems that a considerable portion of Microsoft's gains are from a product that sold well due to hype and forced use with new PCs. I don't know about you but that has reinforced my skepticisim over Microsoft's continued gains in the OS marketplace. In fact, I think the demand for a newbie-friendly Linux OS is getting stronger as many small business owners like myself tire of the costly upgrades from Microsoft; costly not just financially but from a stability standpoint. Is Microsoft Doomed to Complacency? Now I understand that comparing Microsoft's grip on the OS industry to the search industry is a long shot; Microsoft is the Google of the OS industry after all. However, stretch your imagination and compare where MSN was when it was arguably a significant player in search and where Microsoft's OS division is now. Why Microsoft lost search market share can be put quite simply... a lack of innovation. MSN lost its edge and fell into obscurity while relying on Windows to maintain its user base; nowadays Microsoft's share of search has faded to appalling levels. In fact, as the MarketingPilgrim blog noted brand is becoming more important and Microsoft's pride that Live Search's results are highly relevant is, frankly, outdated. Proudly announcing relevant search results is akin to a company saying they offer "professional services"... umm, yes I would hope so. Comparatively Microsoft is wildly insistent that its OS is the present and future of the PC, however, the simplicity and innovativeness of Apple and the out-of-the-box stability and low cost of Linux is eroding Microsoft's market share and in-turn its brand.
All-in-all, I have a hard time remembering any significant advance that Microsoft released before any other company. Doubtless there are many but the fact that I, an ardent computer geek, cannot think of something right away... well I think that speaks volumes. Microsoft needs to learn a few things from its competitors (like Google); empower your massive research and development department by allowing them to launch betas and innovate in the public forum! Without some innovation and some sense that Microsoft is something more than a follower the mega company will always seem to be one step behind the competition and that is going to do nothing good for its brand. In fact I think their brand will slowly rot away unless they show they deserve the continued respect they so often expect.
Barry Schwartz over at Search Engine Round Table posted screenshots of Microsoft's Live Search Webmaster Portal in Beta. Head on over and check it out. So far nothing appears to be all that dissimilar to the other portals out there but it is still an interesting peek
Hello all. My name is Tim Rule and I’m the most recent addition to the StepForth team. I believe my current title is “Gopher”, but I’m preparing to take over PPC management from Scott in the very near future.
I thought I’d take this opportunity to introduce myself to this blog by sharing an interesting thread I read in Slashdot this morning.
Not surprisingly, Microsoft has been fairly quick to recognize the long term threat to their dominant stature and have already taken steps towards addressing this.
With the XO not even released yet, I find it amazing the speed with which they have undertaken to insert themselves into this relatively recent initiative. It makes one wonder why they often seem so sluggish to resolve problems with their own products and yet find the energy to jump into new initiatives.
Personally, I applaud this initiative and intend to pick up one of these myself. I can think of no globally worthwhile investment an individual can make to beat this. It is pretty hard to beat getting a warm, fuzzy feeling, a nifty new toy and a tax write off in one fell swoop.
May 3, 2008 
Blink
Del.icio.us
Digg
Furl
Google
Simpy
Spurl
Y! MyWeb
Over the weekend 
