Microsoft to buy Yahoo for $44.2 Billion

Microsoft sent a letter to Yahoo’s board of directors offering to buy the company for $44.2 billion. This highly inflated (62% above yesterday’s closing price) offer seems like a good deal to Yahoo who plans on firing 1,000 employees and spending $300 million in 2008 to revive the company.

Both, Microsoft and Yahoo, have been experiencing major pressure from search engine giant, Google, Inc, the company which practically stole Yahoo’s massive share of the search engine market early in the decade.

Google is a major competitor of Microsoft in the software and online advertisement business. Google’s policy of offering practically everything for free has put immense pressure on Mircosoft (see Hotmail’s upgrade of storage space to Windows Live). Google greatly supports the Linux operating system, even coming up with their own versions. Linux, although currently not a serious competitor for Microsoft and Apple, has been greatly increasing its market share in previous two years.

With Microsoft’s continually declining stock since Christmas, possibly due to their failed operating system (Vista), and Yahoo’s declining stock since 2005, a “merger” seems like the best way for the two companies to have a real go at Google.

[Image Credit: Christian Lang]