Transcripts

Microsoft's Mega Bid For Yahoo!

SUSIE GHARIB: More now on our other top story, Microsoft's $45 billion bid for Yahoo! The software giant is offering $31 a share. That's a 62 percent premium over Yahoo!'s closing price on Thursday. Yahoo! says its board of directors will study the bid. But lawmakers in Congress are already weighing in. They'll hold a hearing on the mega-deal next week. As Scott Gurvey reports, so far, analysts are positive on a Microsoft/Yahoo! tie-up.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Microsoft bid for Yahoo! was a surprise, both because of its size and because it is an uncharacteristically unfriendly act. Microsoft quietly pitched Yahoo! on the idea of an acquisition one year ago, only to be rebuffed. Now, Microsoft CEO Steve Ballmer has gone public with his bid. And in a conference call with analysts and the media today, he made it clear he will pursue a vote of Yahoo! shareholders.

VOICE OF STEVE BALLMER, CEO, MICROSOFT: If you look at Microsoft and Yahoo!, our companies really do share a vision for the potential of online services and advertising, specifically. When you combine the strengths of our two companies, the result will be an incredibly efficient and competitive offering for consumers, for advertisers and for publishers.

GURVEY: Consumers, advertisers and publishers -- all three are needed to be a success in Internet advertising. Bobby Tulsiani of Jupiter Research notes that advertising is not all there is to the Internet, but it is where you find the greatest growth potential.

BOBBY TULSIANI, INTERNET ANALYST, JUPITER RESEARCH: There's also businesses like web e-mail, portals, being a sports destination, being a news destination. And Yahoo! and MSN already do very well in that. So, when you combine them, they're going to do even greater in those areas. But search is the area where they've been lagging and that's the area Wall Street and everybody looks to for where you make your money.

GURVEY: And that is where Google has been cleaning up. If anything, this deal is a last shot at competing with the search giant. At the end of last year, Google had 75 percent of the search-ad business. Yahoo! had 19 percent and Microsoft 6 percent. Analyst Imran Khan at JPMorgan Chase, which has an investment banking relationship with Yahoo! and owns more than 1 percent of Microsoft's stock, says this is a case where size really matters.

IMRAN KHAN, SR. INTERNET, MEDIA & ENTERTAINMENT EQUITY ANALYST, JP MORGAN: When you increase your market share, your monetization of search goes up. One of the reasons Google improved its monetization significantly is because of market share gains. So, I think the search monetization will help them. Secondly, if you look at Yahoo!, it is very strong in the United States, but they're not very strong outside the U.S., whereas Microsoft has a very stronger position in the European market. So it will help to expand their business in international market.

GURVEY: Both European and American regulators will have to sign off on a Microsoft-Yahoo! merger. First, of course, Yahoo! shareholders will have to approve the deal. Steve Ballmer is predicting success and a closing in the second half of this year. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.