Friday, February 1, 2008

Microsoft Proposes To Buy Yahoo For $31 Share, In $44.6-Billion Deal -- InformationWeek

Microsoft Proposes To Buy Yahoo For $31 Share, In $44.6-Billion Deal -- InformationWeek: "Microsoft Proposes To Buy Yahoo For $31 Share, In $44.6-Billion Deal"

¶6 of Steve Balmer's letter to the Yahoo! Board:

"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. Today, the

market is increasingly dominated by one player who is consolidating its dominance through

acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers,

advertisers, and publishers. Synergies of this combination fall into four areas:

Scale economics: This combination enables synergies related to scale economics of the

advertising platform where today there is only one competitor at scale. This includes

synergies across both search and non-search related advertising that will strengthen the

value proposition to both advertisers and publishers. Additionally, the combination allows

us to consolidate capital spending.

Expanded R&D capacity: The combined talent of our engineering resources can be focused on

R&D priorities such as a single search index and single advertising platform. Together we

can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in

search, and new advertising platform capabilities. Many of these breakthroughs are a

function of an engineering scale that today neither of our companies has on its own.

Operational efficiencies: Eliminating redundant infrastructure and duplicative operating

costs will improve the financial performance of the combined entity.

Emerging user experiences: Our combined ability to focus engineering resources that drive

innovation in emerging scenarios such as video, mobile services, online commerce, social

media, and social platforms is greatly enhanced."

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