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Bill Gates, the world’s richest man, yesterday went to war with Google, the most powerful company on the web, over the future of the internet.
Microsoft, the software empire founded by Mr Gates, launched a $44 billion (£22 billion) assault on the search engine with a hostile bid for Yahoo!, Google’s rival, the largest hostile takeover offer seen on Wall Street.
Mr Gates has watched for several years in which Microsoft’s dominance of technology has been superceded by the rise of Google. He made his move after 18 months of fruitless behind-the-scenes talks with Yahoo!
At stake is an estimated £40 billion of online advertising by 2010 – double today’s figure – in what is a last-ditch attempt by Mr Gates to stop Google’s runaway success.
The move underlies Mr Gates’s determination to succeed after repeated overtures to Yahoo! were rebuffed.
Steve Ballmer, chief executive of Microsoft, said: “A year ago the Yahoo! management team told us it wasn’t really the right time to discuss an acquisition. We believed then in the benefits of combining the two companies and we believe now in those benefits more than ever.”
Google-owned sites last year became the most visited on the internet, with 587 million people logging in during December. Microsoft, ahead a year ago, was visited by 540 million unique users and Yahoo!, in third place globally, by 485 million.
Internet advertising is soaring: Microsoft said it would double from $40 billion now to be worth $80 billion in 2010.
Although Mr Gates’s company has long dominated the supply of software for personal computers, it has been unable to translate that into commercial success on the internet. Microsoft admitted yesterday that its own search engine and sites lose money, while Google is adept at commercialisation and is now valued at $162 billion.
Yahoo! is reluctant to fall victim. The company is run by Jerry Yang, 39, one of its two founders, whose own shares were yesterday worth $1.6 billion after Mr Gates’s move.
Mr Yang took control of the business last year amid a prolonged crisis in which profits tumbled.
The Californian culture of Yahoo! is radically different to the Seattle-based Microsoft, which is known for its disciplined approach to software development. However, Yahoo! has failed to expand as quickly as Google, and this week was forced to make 1,000 employees redundant.
Mr Gates’s target first learnt of the hostile approach in a phone call on Thursday night to Mr Yang. Yesterday Yahoo! hired Goldman Sachs – a bank that previously advised Microsoft – and Lehman Brothers. Publicly it kept its options open, saying it would “evaluate this proposal carefully and promptly.”
Yahoo! shares soared 46 per cent but at $28.12 remained below Microsoft’s offer, worth $28.99 last night.
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Ballmer says Microsoft are doing this to stop losing money in their internet business.
They could lose the same amount of money for over 50 years for $44B OR run competitions for all the cool programmers to write neat apps in the same way Google does. In fact, there are a whole bunch of creative things one could do for a lot less than $44B to attract users.
But then Microsoft have never been created.
Perhaps they will rename the combined group iMSN
Paul, Toronto, Canada
As a website owner I see the google bots crawl the site everday keeping the search data up to date. I also use ppc and the tools and tips are great. I have looked at other search engines but google treats me as a customer not my prostate doctor.
James Hendry, Adealaide , Australia
I think the microsoft this appealing and that the geniuses of the google will always be the search of something differen
Marcio Vieira, Fortaleza, CE /Brazil
Bill Gates is a not a man who has ever been short on ambition. He is determined to make Mircosoft the number one internet company in addition to the world's leading software manufacturer.
He has faced and overcome major problems before. In 2000, he received a major setback when Microsoft lost a federal anti-trust law suit and was ordered to split up. He managed to settle the case in the US (litigation continues in the EU in front of the European Court of Justice) and then proceeded to fend off competition from Apple's revolutionary product line in 2001.
This is a man who first founded and now manages the world's largest charitable organisation in his spare time. His relentless pursuit of success makes him a worthy adversary and the Google 'giant' would be foolish to underestimate him.
He is determined to reign supreme as a 'benevolent' leader. How long can Google stand in his way? For the takeover of Yahoo! will probably usher in a new historical epoch in the IT world.
Zoha Sirhindi, Nottingham, UK
Hi,
The assertations of Mr. Gates to purchase Yahoo will confront the already stained relationship with the European union.
Regards Dr. Terence Hale Zandvoort
Terence Hale, z, Holland
Looks like the USA economy is in real trouble having to ask Bill Gates to come up with PR deal on behalf of this great
economic power to paper over the near collapse of the
financial system.
riverbanka, Liverpool, UK
Ultimately money cannot beat innovation. Google has been innovating, and extremely quickly, in the way they approach softwares. Arguably they are copying Microsoft's softwares, but ironically, they seem to be doing better job at making them than Microsoft is. What MS has is money and market share. What Google has is user friendliness and expertise. Both are equally cunning. It would be interesting to see what'll happen after MS really takes over Yahoo. What assets can Yahoo offer MS that MS cannot build? Loyal users? Somehow I believe that by acquiring Yahoo, MS wil have plans to dissolve the brand and integrate it into their own brands, which would turn users away.
Mark, Manhattan,
MSN is a poor search engine with many gaps in its information while Yahoo is better but still unable to compete with Google. What then is the point of putting these together in the absence of one of them at least getting their act together first?
figurewizard, Petersfield, UK
Patently Microsoft has run out of ideas of its own. The X-box hasn't made a monumental impact, with Wii being the console of the moment. It is stuck with a technology model.
It is ironic that Microsoft is going down the same path as IBM 15 years ago. IBM bought Lotus for more than it was worth, the norm in takeovers where the bidder pays far more than the bid company is worth, in the early 1990s because it was scared of Microsoft. Lotus was faltering as a business just as Yahoo is now and IBM's valuation (as MS now) vastly overvalues the business.
Now Microsoft because it is scared of Google. But Google's model is faltering and will falter further after the EU relaxes advertising content in TV shows..
And, even if they succeed, the EU will take a close look at it.
MS is now a mature company with a mature growth profile and more money than imagination.
Eddie Reader, birmingham, england
I have had a Yahoo e-mail address for 8 or 9 years and have used it every day. In that time I haven't paid a penny to Yahoo or clicked on any adverts.
What sort of business model is that?
David, Dubai, UAE
Right then! Time to abandon ALL Microsoft products and move to Open Source and alternative OS's.
Bill, Suzhou, China
This topic is very hot on tallhub.com, most members think that Google will win since google is more skilled in internet.
rena, NY,