The jumbo offer

Last Friday’s big news was the offer of Microsoft to buy out Yahoo Inc for $ 44.6 bn; I heard somebody shouting it out in my office. I had no idea whats and whys of the breaking news, but it was big nevertheless.

So I decided to do some investigation. The news was probably big because of the amount involved..it was probably larger than the valuations the current price levels reflected. And yes, I was right! The scrip rose from $19.15 to $ 28.38 on Friday, giving it a jump of a whopping 48%!. In the volatile and sentiment stricken economy like ours, a 20% would have touched the upper circuit. But at 48%, it had to be something!!

The valuation at the end of Thursday was $26.45 bn, while it rose to $ 39.58 by the end of the week, still lower thMicrosoft’s valuations. Whats there in yahoo that Microsoft is after?

One of the apparent objectives appears to be to take on google, the fastest growing name in the industry. With its unique offerings and revenue models, google is leading the way; and is strongly challenging Microsoft’s dominance in the desktop market. With concepts of SaaS getting more prevalence, buying getting-obsolete-soon software may not find many takers, if google comes up with their offerings in a big way. This would seriously affect Microsoft that has held the PC market with its software for decades now.

Some changes are happing in the Microsoft’s front as well. Applications like CRM are finding their way on the Microsoft network on the web. Windows live is an initiative in that front. An interesting article on this move can be found here

The dealbook on New York Times gives an interesting perspective of what the deal can be. It can be read here

Interestingly, google founders Larry Page and Sergey Brin had offered Yahoo to buy it out, while the former was a startup, it was refused. The cyber world today would have been so different, had the deal got through. This is a juncture where the history of the Internet will be rewritten, and whatever happens, the Internet will not be the same again.