Yahoo! Inc. (NDAQ:YHOO) shares jumped $4.50, or 15.97%, to $32.68 today after reports surfaced that
Microsoft Corporation (NDAQ:MSFT) considering a buyout of the search engine in order to better compete with mutual-rival
Google Inc.
(NDAQ:GOOG). The combined company would more than double Google's
market cap and close much the Google's lead in the search business.
The
speculation began when the New York Post reported that Microsoft has
asked Yahoo to enter formal negotiations for an acquisition that could
be worth upwards of $50 billion - significantly higher than Yahoo's $38
billion market cap as of Thursday. Meanwhile, the Wall Street Journal
is reporting that executives of the two companies are looking at a
merger or some other kind of match-up, but cautioned that the talks are
still in early stages.
The idea shouldn't come as
that
big of a surprise to investors - it's happened before! The two
companies explored the idea of combining last year but the talks led
nowhere. Now, both companies are feeling the pressure to compete with
Google, which recently beefed up its portfolio with its $3.1 billion
acquisition of DoubleClick, Inc. Google also won search deals last year
with AOL and MySpace, which dramatically increased its lead in the
search business.
So, what are the chances of a match-up at this
point? Well, it is likely that the two will at least put together some
kind of a search agreement in the near-term to compete with Google.
Whether or not there will be a full scale merger remains to be seen.
However, sources close to the situation also said that Microsoft's
latest approach to Yahoo signaled an increased urgency - so we should
know something soon!
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