Google earnings are only 17 percent this quarter, making this the first quarter that Google earnings did not exceed 25 percent. As a result, the stock took a tumble of 8 percent, coincidentally, the same amount they missed analyst expectations by.
Microsoft, in the meantime has decided that if you can't beat the competition, you can try to buy them out. With a purchase price of 44.6 billion dollars, a number well over its book value of about 10 billion dollars. As a result, Yahoo stock is up 48 percent, bringing the market cap of Yahoo! to about 37 billion. Google, of course is number one in search engine traffic at 65%, Yahoo is number two at a respectable 21 percent, while MSN ranks at third with 7 percent. In November of 2007, Microsoft made a bold statement that they aimed to be in the top two in search; while I originally thought they would do it through efforts in engineering and better advertising of their search engine, it looks like Microsoft is throwing money at the problem in a different way.
Microsoft has been one of those companies that came late to the internet party; they didn't realize how important it would be, and ended up spending a lot of time and money on it trying to catch up to the rest of the pack. One of their first internet-related purchases was the code to Mosaic, which they used to create the first versions of Internet Explorer. Another was the purchase of WebTV, a television set-up box which allowed users to surf the web on the television. The potential of buying Yahoo! would boost Microsoft's web presence greatly; not just in search, but in many other service areas as well. Yahoo! owns Flickr, del.icio.us, upcoming.org, and 46% of Alibaba (one of China's biggest search sites) among other acquisitions not branded by the Yahoo! label.
I've always found some of Yahoo's services superior to Google's -- namely Flickr over Picasa, and My Yahoo! over iGoogle, but rarely do I find any webapp of Microsoft's even remotely useful. With share prices of Yahoo! skyrocketing over this news, I'm pretty certain a refusal of this buyout bid would not go over well with shareholders.
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