21:49 PM

MSFT $44.6bn Bid For Yahoo! Could Win Approval Quickly

Yahoo! said it had received an unsolicited acquisition bid from Microsoft. It's board of directors said it would evaluate the proposal "carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."

The $44.6 billion bid ends many months of speculation that Microsoft wanted to acquire Yahoo! If the bid is successful, it would vault MSFT into a strong second position in search and other Internet businesses.

At $31 a share MSFT is offering a generous premium of 62 per cent indicating that it wants quick approval for the deal.

Microsoft is eyeing the massive shift in the advertising industry to online. It estimates that the online ad market will double from $40 billion in 2007 to $80 billion in 2010.

Ray Ozzie, chief software architect at Microsoft said, "The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners."

The Yahoo! board of directors had rebuffed Microsoft in February 2007 saying that the company's "potential upside" would be good because of several key initiatives. In a letter to Yahoo! Microsoft said, "A year has gone by and the competitive situation has not improved."

Microsoft has calculated that the acquisition could be completed in the second half of 2008 and eliminate $1bn in annual operating costs for the combined entity. The letter to Yahoo! promised generous retention packages to its "engineers, key leaders and employees across all disciplines."

Microsoft's bid comes one day after the resignation of Yahoo! chairman Terry Semel. He has been replaced by Roy Bostock, a board memebr since May 2003. Mr Bostock has a strong background in advertising and marketing.