Microsoft Wants to Gobble Up Yahoo

It’s been rumored for a long time, but this time it’s true. Microsoft has offered to buy troubled Yahoo for $44.6 billion.

“We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” said Steve Ballmer, CEO of Microsoft.

For several months Yahoo has been spinning in infinity in an identity crisis and Google has taken advantage of that situation becoming the undisputed leader of the industry. This week Yahoo reported that net income for its fourth quarter declined to $206 million, from $269 million a year earlier. It also announced plans to lay off about 1,000 staff.

The company has been losing market share to Google and warned earlier this week that it faced “headwinds” in 2008, forecasting revenue below Wall Street estimates.

Yahoo said the online advertising market is growing rapidly and expected to reach nearly $80 billion by 2010 from over $40 billion in 2007. Yahoo added it is “increasingly dominated by one player,” referring to Web search leader Google.

The unexpected announcement comes as Microsoft, the world’s biggest software company, seeks new ways to compete more effectively against the search and online advertising powerhouse Google Inc.

Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock.

In my opinion, this acquisition will not hurt Google’s goal to control the Internet. Their general strategy has been carefully laid out and its lead is so great, that Yahoo will only be a tremendous weight for Microsoft, who is desperately trying to understand how cloud computing works. Both Google and Yahoo are Internet-born companies. Microsoft is deeply embedded in the desktop world and does not fully understand the forces underlying online applications.

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Motorola’s Dilemma in Cell Phone Unit

In an effort to decrease steep declining sales and profits, Motorola Inc. is considering a sale or spinoff its now free-falling cell phone business.

A company’s spokesman said the company said it is looking at ways to “better equip its mobile devices business to recapture global market leadership and to enhance shareholder value.” It wasn’t clear whether that means a spinoff, sale or joint venture is more likely.

“It sounds like everything’s on the table,” Morningstar analyst Jordan Zounis said.

Motorola said separating the mobile devices business, which is dominated by cell phones, would “permit each business to grow and better serve its customers.” Its two smaller businesses are home and network mobility, which sells TV set-top boxes and modems, and enterprise mobility solutions, which sells computing and communications equipment to businesses.

Greg Brown, Motorola’s new CEO said in a written statement, “We are exploring ways in which our mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of this great franchise.”

Zounis suggested that Motorola might be a good candidate for an Asian company that could help it gain in key international markets while helping to shore up its U.S. market strength.

“What they need is a lower cost structure and better access to Asian markets,” he said.

The mobile phone industry has always been a cut-throat industry. Apple’s new entry in the market with its revolutionary iPod is making things worse. Nokia and Samsung are focused like a hawk in designing strike-back marketing strategies in an attempt to hold their global market share position. Google’s Android cell phone operating system plus the 700 MHz wireless spectrum bid is adding lumber to the fire in a hyper-competitive environment where only the fittest will survive.

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