Microsoft says it offered $9 billion to Yahoo

By , IDG News Service |  Internet, Yahoo, Microsoft

In a letter to employees on Friday, a Microsoft executive said the company had offered to buy Yahoo's search assets for US$1 billion and invest $8 billion in the remaining company, before talks between the two ended.

Microsoft's offer, which would have included a long-term search partnership, would have increased Yahoo's operating income by more than $1 billion above the search provider's current levels, Kevin Johnson, president of Microsoft's platforms and services group, wrote in the letter to employees.

"Taken together, we believe that our proposal would have created total value for Yahoo's shareholders in excess of $33 per share," he wrote.

His letter comes a day after Yahoo said that it had concluded negotiations with Microsoft and decided to start carrying advertising from Google alongside its search results. Yahoo said it expects the Google deal to generate an annual revenue opportunity of $800 million for Yahoo.

Yahoo's stock had slumped to around $23.47 at the end of the day Friday. Microsoft recently pulled an offer of $33 per share for the whole company.

Johnson's letter, made available by Microsoft's press department, is the software maker's first public comment on Thursday's agreement between Yahoo and Google. That deal "would start to consolidate over 90% of the paid search advertising market in Google's hands," Johnson wrote. "This will make the market far less competitive."

He also hinted at potential difficulties the arrangement may face. "There are many experts who suggest that a host of legal and regulatory problems lie ahead for Google and Yahoo," he said.

Yahoo and Google have said they don't believe the deal needs regulatory approval, although they have submitted it "voluntarily" for review by the U.S. Department of Justice anyway. Google argued in a blog posting Thursday that the deal would be "good for competition."

Others have also expressed concern about how the deal might only strengthen Google's already dominant position in search advertising. U.S. Senator Herb Kohl, who is chairman of the U.S. Senate Antitrust Subcommittee, said Thursday he would examine the competitive and privacy implications of the deal. "This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns," he said in a statement.

Other such far flung organizations as the National Black Chamber of Commerce and the American Corn Growers Association have expressed their concerns about the deal's impact on search advertising.

In the meantime, Microsoft plans to continue to execute on its stated plan to boost its search and online advertising position including through internal development, Johnson said.

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