Microsoft sets sights on Yahoo!

Microsoft makes multi-billion dollar offer for struggling Yahoo! as it looks to challenge Google

Microsoft has pounced on MSN-rival Yahoo!, in an attempt to defy Google’s supremacy in the online search and advertising market.

A cash and share bid of $44.6bn (£22.4bn) was made by the software colossus today following recent weeks of struggling performance from Yahoo!

Steve Ballmer, chief executive officer of Microsoft, said: “Microsoft has great respect for Yahoo!, and together can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.”

“Microsoft believes its combination will deliver superior value to our respective shareholders and better choice and innovation to its customers and industry partners.”

Dr. Hans Friederiszick, Managing Director of economic consultancy ESMT Competition Analysis, said: “Competition issues will focus on the question of whether this will encourage unilateral price increases for internet advertising via search engines given the already high level of concentration in this market. “

“This merger will reduce the number of search engine providers with significant global reach from three to two, paving the way for a tight duopoly in these markets. As such, the EC competition authority is right to carefully scrutinise ongoing mergers in this industry.”

He added: “In turn, Google may welcome this move as it allows Google to argue that its likely dominant position is contested by an equally strong player. Whether the merged entity will have this potential remains to be seen.”

“In any case, one barrier for the proposed merger to get approved may be the relationship between the Commission and Microsoft, following its strategic use and abuse of interoperability. If Microsoft were to bundle search and advertisement facilities into the Windows operating system, this would certainly be a cause for concern.”