Yacrosoft Deal Dropped

Posted on May 4 2008 - 7:01pm by Richard Sharp

Yahoo Valuation Too High For MicrosoftMicrosoft has dropped its proposed bid to buy out search giant Yahoo. Microsoft had wanted Mihoo, or Yacrosoft (or maybe just MY!), to compete with the seemingly untouchable Google for the search king title. Having raised their initial bid from $44.6bn to $47.5bn, Microsoft has withdrawn because they were not willing to meet the $53bn valuation set by Yahoo.

Websites and Internet businesses have set a truly astonishing benchmark when it comes to valuations and bid prices. Yahoo are demanding more than $50bn for a company that has a fairly minimal share in a $40bn market – although analysts do expect this value to rise to $80bn by the year 2010.

In march 2005 Ask Jeeves, which holds considerably less market share than Yahoo, was purchased for a $1.85bn investment. More recently, Skype was purchased by Ebay for $2.6bn (which could rise to as much as $4.1bn depending on performance) – that’s a lot of money for a free service. YouTube was sold to Google for $1.65bn while MySpace went for a snip at $580mn to Fox Interactive.

Most of us can barely comprehend a figure of that magnitude but it seems that the search engines and portals are buying businesses for tens of billion dollars without hesitation. Can Ebay really turn a profit on Skype when they payed $2.6bn for it? In comparison to some of the prices, the $580mn for MySpace has the greatest chance to impress but, even then, that’s a lot of monetisation.

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