Microsoft to face rivals in Yahoo battle

Published on Saturday 2 February 2008 14:51

GLOBAL giants including Apple and Rupert Murdoch's News Corp are believed to be considering rival bids for the internet company Yahoo, which has received a $44.6bn (£22.6bn) offer from Microsoft.

The conglomerate InterActiveCorp was another company named as a potential bidder for Yahoo, which is said to be unwilling to give in to Microsoft without a fight.

After Microsoft's chief executive Steve Ballmer made the offer in a letter on Thursday, it emerged that Yahoo had rejected a similar takeover attempt by Ballmer's organisation a year before.

Yahoo chief executive and co-founder Jerry Yang is understood not to be Microsoft's greatest fan, and would be prepared to line up another 'white knight' rather than concede to Ballmer.

It is believed he would be particularly open to a rescue bid from Steve Jobs' Apple Corp, having openly expressed his admiration for the firm in the past.

Yang last year invited Jobs to Yahoo's headquarters in Sunnyvale to give a motivational talk to staff.

In a statement on its website, Yahoo said: "Will the board seek proposals from any other companies? The board is going to evaluate all of Yahoo's strategic alternatives and pursue the option that it believes can best maximise value for our shareholders."

David Garrity, analyst at Dinosaur Securities, said a number of China's leading search engine firms may also enter the race. He named Alibaba.com, the Asian search engine which is 40% owned by Yahoo, and Baidu.com, China's market leader.

But Ballmer is unlikely to back down easily. Analysts say Microsoft will readily raise its cash-and-shares offer if another bidder forces its hand.

In a conference call last week, Ballmer showed he meant business when he said: "If we don't get it right at first, we'll just keep coming and coming and coming and coming."

The takeover bid – which if successful will mark the biggest internet deal since Time Warner's $182bn (92.5bn) takeover of AOL at the height of the dotcom boom – is an attempt by Microsoft to gain ground on Google in the global search engine market.

Although Microsoft is still the leading technology company in the world, it is believed its position could soon be threatened if it doesn't turn around its loss-making internet arm and increase its share of the online advertising market.

Recent figures show that Google dominates 66% of the global web search market. Yahoo and Microsoft are leagues behind with just 13% and 4% of the market respectively.

With advertisers expected to double their internet spending by the turn of the decade, analysts say Microsoft cannot afford to fall behind in the search engine wars.

Jonathan Yarmis, analyst at AMR Research, said: "Microsoft has to do this deal. It's a battle that Microsoft needs to win."