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NEW YORK: Microsoft’s failed attempt to buy Yahoo
will send it searching for new allies and likely see Yahoo’s share
price plummet, leaving Internet giant Google the big winner,
analysts said.
Microsoft announced Saturday that
it had given up its quest for the struggling Internet pioneer Yahoo,
which rejected Microsoft’s offer even after it raised the original
bid by five billion to more than 46 billion dollars.
The announcement ended three
months of overtures by the software giant, which wanted to merge its
Internet resources with Yahoo’s worldwide offerings to gain ground
on undisputed online advertising juggernaut Google.
Google meanwhile has increased
its share of the Internet search engine market and multiplied its
innovations. The firm recently also announced a way to refine its
image searches, based on technology that recognizes images, not
text.
Analysts believe moreover that
the Microsoft-Yahoo talks have benefited Google, and suggest
Microsoft did well to cut them short.
“Microsoft did the smart
thing—they walked,” said Silicon Valley analyst Rob Enderle.
“Yahoo’s stock price is going to come down like a rock on
Monday.”
Experts were surprised that Yahoo
did not accept what was considered a generous offer and predict that
its stock price, bereft of the prop of Microsoft’s bid, will
plunge even further.
Before Microsoft’s offer on
February 1 to buy Yahoo for 31 dollars a share, Yahoo was trading at
just 19 dollars and was on the decline, having lost 33 percent of
its value since October 2007.
“Yahoo is going to have to
convince the market they are worth more than they were before the
Microsoft offer,” Gartner analyst Van Baker told AFP.
Analysts are also questioning
whether Microsoft is not banking on Yahoo’s share price dropping
so it can make another, possibly lower, offer.
“They could be betting
Yahoo’s stock price is going to collapse and they will be able to
get it for even less,” Baker said.
Others believe Microsoft will
give up on Yahoo as it continues to lose ground to Google, and move
its attention elsewhere. It could buy AOL, part of Time Warner,
online marketing firm ValueClick or even social networking site
MySpace.
“There are other acquisitions
Microsoft can make which, when multiplied, could put them in a
better position than buying Yahoo,” Baker said.
In its statement Saturday,
Microsoft raised the possibility of deals with “other business
partners.”
Despite its near-monopoly in the
global computer market thanks to its Windows and Office software,
Microsoft remains a dwarf on the Internet, with less than three
percent of the search market.
Its core business is also facing
competition from software available online and often for free,
financed by advertising, such as that provided by Google.
Google, Yahoo and Microsoft are
fighting over the emerging online ad market, which is worth more
than 40 billion dollars and is expected to double by 2010. Google
has a 30-percent share, Yahoo 14 percent and Microsoft 6 percent.
Microsoft is losing money on its
online services, and has increased its purchases in this area. Its
Chief Executive Steve Ballmer said last year that 25 percent of its
revenue would eventually come from online advertising.
In the last few months, the group
has acquired Norwegian search engine Fast, marketing firm aQuantive,
it has taken 1.6 percent of Facebook, and acquired ScreenTonic,
which deals with mobile phone ads, and TellMe voice query services.
Yahoo is also on the search for a
new strategy, and recently announced a limited test of Google’s
AdSense for Search service, which would deliver Google ads alongside
Yahoo’s own search results—strengthening Google’s hand
further.
--AFP
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