Microsoft, Yahoo agree on buyout price

Editor's note: The following story is from InfoWorld's 2008 April Fool’s spoof-news feature package. It is not true. Enjoy!

After much internal debate and industry speculation, Yahoo today agreed to be acquired by Microsoft, adding $2.6 billion to Redmond's original offer of $44.6 billion on Jan. 31.

The agreement was reached near midnight last night, thus closing a contentious quarter for the Web company, one rife with in-fighting and power jockeying since Microsoft's initial offer.

Of the agreed $47.2 billion, $10 billion is in cash and the rest in stock, with $1.12 of Microsoft stock being swapped for each share of Yahoo stock, roughly a 12-cent-per-share premium over Yahoo’s $29.05 closing stock price on Monday.

The final price -- $33 per share vs. the original $31-per-share offer -- was less than Yahoo’s board wanted, sources said, but its recent “poison pill” actions such as providing all employees with four to 24 months of severance, based on their level in the company, should they be laid off in an acquisition, limited its ability to obtain a higher offer from either Microsoft or another firm such as Google, said Arbor Research analyst Jane Simons.

“The acquisition with Yahoo will better position Microsoft in the Web advertising market, as well as provide a strong platform for the delivery of Internet-based services to consumers and business users,” said Kevin Johnson, president of Microsoft's platforms and services division, which will oversee the Yahoo service offerings.

[ Follow the entire saga over Microsoft’s acquisition of Yahoo  in our special report. ]

Yahoo CEO Jerry Yang, who had publicly opposed the acquisition, said, “Being part of Microsoft will let the Yahoo vision reach further than we could have done on our own. And we will provide Microsoft the engine it needs to deliver on its Web-based services vision.”

Yang will join Microsoft as “chief Yahoo,” with specific duties to be determined later. Employees that Microsoft decides to retain will be offered an Xbox 360 game platform and a Zune music player as tokens of appreciation, in addition to cash grants and stock-option incentives for higher-level employees, Johnson said.

Although Yahoo had previously suggested a possible counteralliance with Google as a way of combating a Microsoft takeover, Google’s parallel announcement today that it would acquire the social media site Facebook indicates that Google saw little value in adopting Yahoo and was seeking to compete with Microsoft in new spaces, said Nigel Hydecombe, an analyst at Trapezoid, a U.K. research firm.