Wireless ringing with potential of Microsoft-Yahoo combo

Microsoft Corp.’s proposed acquisition of Yahoo Inc. may be centered on Internet search, but the takeover — if consummated — could make huge waves in the world of wireless.

The Redmond, Wash.-based software giant offered $44.6 billion in cash and stock for Yahoo, marking a 62% premium over the stock’s price at Thursday’s close. Yahoo executives, who spurned Microsoft’s advances a year ago, said they will consider the offer "and pursue the best course of action to maximize long-term value for shareholders."

The proposed takeover is an obvious attempt to gain ground on Google Inc., which has dominated online search and advertising, as Microsoft CEO Steve Ballmer pointed out in a letter to Yahoo’s board.

"While online advertising growth continues," Ballmer wrote, "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."

Much of Google’s increased dominance can be traced to Yahoo’s struggles. The company earlier this week said it will slash 1,000 jobs in the wake of a fourth quarter that saw profits plunge nearly 24%. Yahoo also issued a disappointing guidance for 2008.

Mobile efforts

But Yahoo’s foray into mobile has been impressive. The firm recently expanded its relationship with AT&T Mobility, agreeing to provide search and display ads on PCs and mobile phones for the nation’s largest phone company. Yahoo has similar arrangements with Vodafone and the Canadian telecom Rogers, and T-Mobile recently announced that Yahoo will deliver display ads on the carrier’s Web’n’Walk service, which is powered by Google.

And Yahoo’s inventory on the mobile Web is in high demand: The company was the top-ranking Internet brand for wireless Web surfers in 2007, according to Nielsen Mobile, drawing more than 16 million unique visitors per month. Google was the No. 2 mobile Web destination, with nearly 11 million monthly visitors; MSN was third with more than 9 million.

Yahoo has also found success with consumer-facing products such as Go for Mobile. The company recently unveiled a developer platform that will support "mobile-optimized applications" such as widgets on its mobile Web pages.

The benefits

Those kinds of offerings — and those carrier relationships — would complement Microsoft’s mobile business, which largely hinges on enterprise users. A tie-up could help both companies counter Google’s Android, a Linux-based mobile software stack. And it would give Microsoft a solid foothold in the frenzied world of mobile advertising, where well-heeled spenders have bought their way onto the field.

Shares of Yahoo jumped $8.72, or more than 45%, to $27.90 following news of the offer. Microsoft investors shied away from the move, however, sending shares of the company down $2.15, or nearly 7%, to $30.45.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s