Microsoft Makes $44.6 Billion Bid for Yahoo!

With the search market growing at amazing pace, it shouldn't be surprising that Microsoft is offering $44 billion. This is the largest deal since AOL acquired Time Warner for $182 billion back in 2001.

Google is dominating the online search advertising market today, with about 70% market share. While Microsoft tried hard to gain a foothold in this lucrative industry [growing from $40 billion in 2007 to an estimate of $80 billion by 2010], it is not seeing much result. 

So, the most natural way is to acquire Yahoo! Acquisition will bring some potential benefits like:

1) Larger economies of scale - Combining search and banner advertising that is currently operated by Yahoo!

2) Combined resources - Microsoft definitely need more talents and research resources and facilities that Yahoo! currently owns. This will help to bring its search capabilities to the next level.

3) Operational efficiency - The combined entity will emerge with higher efficiency by eliminating redundancy and duplicative resources.

Unfortunately for Microsoft, Yahoo! has rejected Microsoft's offer. "Microsoft's $31-per-share offer massively undervalues the company", according to a report in The Wall Street Journal.