Microsoft and Yahoo!

A $45 billion bet

Feb 1st 2008
From Economist.com

Microsoft's bid for Yahoo!

IT IS a potential deal that has been talked about for years, but has suddenly become a real possibility. On Friday February 1st Microsoft, the world’s biggest software company, made a $44.6 billion offer for Yahoo!, an ailing internet giant. The proposed deal, which would transform the software and internet-services industries, values Yahoo! at $31 a share, a 62% premium over the closing price on Thursday.【ailing  

adjective (formal)
ill and not improving: She looked after her ailing father.
(of a business, government, etc.) having problems and getting weaker: measures to help the ailing economy ◆ A new art gallery will give a boost to this ailing industrial city. v.  感到不适, 生病; 处境艰难; 使苦恼, 使痛苦; 使不适】

In a letter to the board of Yahoo!, Microsoft’s chief executive, Steve Ballmer, referred to previous discussions between the two companies in 2006 and 2007 about a possible partnership or merger. At the time, Yahoo! was hopeful that Panama, a new system it had developed to place advertisements next to the results of internet searches, would improve its fortunes and help it to catch up with Google, the leader in both internet search and advertising. Panama failed to live up to expectations, however, prompting Yahoo!’s chief executive, Terry Semel, to resign in June 2007. 【[C+sing./pl. v.] a group of people who have power to make decisions and control a company or other organization: She has a seat on the board of directors. ◆ The board is / are unhappy about falling sales. ◆ members of the board ◆ discussions at board level ◆ the academic board (= for example, of a British university) ◆ (AmE) the Board of Education (= a group of elected officials who are in charge of all the public schools in a particular area)
organization 董事會】

His place was taken by Jerry Yang, one of Yahoo!’s co-founders, who promised to put things right at the sprawling internet conglomerate. But Yahoo!’s latest results, released on January 30th, were disappointing, and its share price fell to a four-year low. Mr Yang said that the company faced “headwinds”逆風, as Yahoo! announced plans to cut 1,000 jobs, some 7% of its workforce. Microsoft saw its chance. “While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing,” wrote Mr Ballmer.【[only before noun] spreading in an untidy way: a modern sprawling town ◆ sprawling handwriting】

Google is not mentioned anywhere in Mr Ballmer’s letter, but its increasing clout 【[U] power and influence: political / financial clout ◆ The World Bank can use its clout with poorer countries to insist on reforms. ◆ I knew his opinion carried a lot of clout.
[C, usually sing.] (informal) a blow with the hand or a hard object: You're not too big for a clout round the ear!
verb [VN] (informal) to hit sb hard, especially with your hand】in the online-advertising market, as a result of its leadership in search, is what has motivated the deal. “Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition收購【noun
[U] the act of getting sth, especially knowledge, a skill, etc: theories of child language acquisition
[C] something that sb buys to add to what they already own, usually sth valuable: His latest acquisition is a racehorse. ◆ The money will be spent on acquisitions for the university library.
[C, U] (business) a company, piece of land, etc. bought by sb, especially another company; the act of buying it: They have made acquisitions in several EU countries. ◆ the acquisition of shares by employees ◆ The group has announced its first overseas acquisition:
a successful software company.】,” he wrote. Combining Yahoo!, the number two in search and advertising, with Microsoft, the number three, would provide a stronger competitor in an industry where scale provides a huge advantage.

Google currently handles 66% of searches on the internet in America, compared with 21% for Yahoo and a mere 7% for Microsoft (through MSN and its new search engine, live.com). Strikingly醒目地，顯著地, over the past year both Microsoft and Yahoo have seen their share of searches decline while Google's has gained.

The more people use your search engine, the more advertisers you can attract; and the more advertisers you can attract, the more likely you are to be able to serve up relevant advertisements that people will actually click on. As Mr Ballmer puts it: “While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence.趨同，達與一致，收斂”

Microsoft is desperate不顧一切的 【adjective
feeling or showing that you have little hope and are ready to do anything without worrying about danger to yourself or others: The prisoners grew increasingly desperate. ◆ Stores are getting desperate after two years of poor sales. ◆ Somewhere out there was a desperate man, cold, hungry, hunted. ◆ I heard sounds of a desperate struggle, just above my room.】to grab a bigger share of the online-advertising market because many of its software products are being challenged by free, advertising-supported services offered by Google. The company is also worried that Google’s dominance in search and advertising allows it to dictate terms to advertisers, and gives it an unfair advantage over its smaller rivals. This is a bit rich coming from Microsoft, a convicted monopolist in operating-system software, which has also been known to squeeze out smaller competitors, but its anger that it has had to endure years of scrutiny仔細檢查 by regulators, while Google has been left alone, is genuine.

As well as creating a stronger rival to Google, the deal would also have other merits優點，好處, Microsoft claims. The two companies could combine their research-and-development efforts into search, advertising and other areas; they could save money by consolidating the huge warehouses full of computers, known as “server farms”, that both firms operate; and they would be better placed to compete in new areas such as online video, social networking and online commerce. But it is clear that the real prize is greater clout in search and advertising.

Whatever Yahoo!’s management makes of理解，了解 the offer, the firm’s shareholders will be delighted at the news. Microsoft shareholders are likely to be less enthusiastic: integrating the two companies would be a mammoth task, and Microsoft has never made an acquisition on anything approaching this scale before. Some sceptics懷疑論者 say that this is too much to pay for a troubled company, even if it is, by some measures, the world’s biggest internet firm. Microsoft says it is confident that regulators will approve the deal, which could be completed by the end of the year.