Dilemma:

To merge or not to merge

Yahoo vs. Microsoft: pros
and cons
 Prehistory

► Yahoo! was founded in January 1994

► It was the biggest and most powerful

search engine in the network. The company
also held the leading position in
advertisement marketing
In 2005 Yahoo’s
market share
decreased to
30.5% vs
Google 45%
 The offer

On February 1, 2008,
Microsoft made an
unsolicited takeover
bid to buy Yahoo! for
US $44.6 billion in
cash and stock.
If Yahoo rejects:
 Against

► Its market share will keep on falling

► Its share price will decrease
► The company will face financial difficulties
► The company will have to lay off workers
 For
► Yahoo will preserve its independence and
brand, save its technologies
If Yahoo accepts:
 Against

► The company will cease to exist, it will

become part of Microsoft
► Lots of workers including top management
will be made redundant
► Microsoft will use Yahoo’s knowledge for its
own purpose
 For

► The total share price will increase up to

30%
► The total income will increase
► Yahoo will receive Microsoft search engine
(the Bing)
Their decision
On February 11, 2008,
Yahoo! decided to
reject Microsoft's offer
as "substantially
undervaluing" Yahoo!'s
brand, audience,
investments, and
growth prospects
 The result

► On November 20, 2008, almost 10 months

after Microsoft's initial offer of $33 per
share, Yahoo's stock dropped to a 52-week
low, trading at only $8.94 per share.

► 1000 employees were fired

So in 2009 the two companies
reached a compromise
► Under the 10-year deal,

Yahoo.com and
Bing.com will maintain
their own branding but
search results on
Yahoo.com will say
"powered by Bing."
►Microsoft will pay
Yahoo 88% of the
revenue it gains from
searches on Yahoo's
sites.