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Sat 2 Feb 2008 10:41 AM

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Microsoft goes to war - $44bn hostile bid for Yahoo

Microsoft launches bid for Yahoo in battle for internet dominance with Google.

Microsoft on Friday launched a hostile $44 billion bid for Yahoo in a bid to catch up with Google as the internet's dominant force. It is the largest hostile takeover Wall Street has seen.

Microsoft has been courting Yahoo for the last twelve months according to a report in UK newspaper The Times, but the overtures have been repeatedly rebuffed.

At stake is the war for internet advertising. It is estimated that by 2010 the online advertising market will be worth $40 billion, twice its worth today.

Technology analysts see the move by Microsoft as a last ditch attempt to catch up with Google, which last year became the most visited site on the internet, with 587 million people logging in during December.

Google took over from Microsoft, which now lies second with 540 million unique users. Yahoo falls in third place globally with 485 million visitors.

Google has been Microsoft's most persistent competitor, and despite a decade of attempting to convert its dominance of the software market to the internet world, the company admitted yesterday that its own search engine and sites continue to lose money.

Google, by contrast, has proved commercially highly adept. It is now valued at $162 billion.

Microsoft's hostile bid for Yahoo is not assured. Yahoo's chief and co-founder Jerry Yang is resistant, and even if successful integration will be far from easy. The Californian culture of Yahoo is radically different to the Seattle-based Microsoft, which is known for its disciplined approach to software development.

Gates’s target first learnt of the hostile approach in a phone call on Thursday night to Yang.

Yahoo has 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% but at $28.12 remained below Microsoft’s offer, worth $28.99 as of Friday night.

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