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Microsoft bid a whopping $44.6 billion to buy Search and advertising giant Yahoo! Microsoft's plan was to buy out Yahoo at $31 a share. Thats a lot of money but is it enough? Wall Street estimates Yahoo to be worth at least $50 billion. But Yahoo's stock at the time of this deal was $21 a share and many others including Microsoft share holders claimed Microsoft was greatly over over valuing Yahoo.

Why would Microsoft want to buy out Yahoo? The simple answer is they want to compete with Google. Google has recently been not only hurting Microsoft's online presence but also there desktop presence. Google has had Microsoft beaten in search and online advertising, but with Google's development of web application such as Google Docs and Spreadsheets they entered into direct competition with Microsoft Office. Microsoft realized that they need to jump onto the web 2.0 bandwagon to achieve a bigger web presence. Yahoo is Google's main competitor in search and advertising and is well into the web 2.0 market with there purchases of websites like flickr.

When Google first heard of the attempted purchase of Yahoo by Microsoft they made their views clearly heard. Google would not just stand and watch Microsoft buy out Yahoo. In Open letters Google's executives raised concerns of Microsoft's past in having a monopoly. Google claimed this deal if it went through would create a monopoly and would have adverse effects on the internet and its users. Google went on to say that this monopoly would slow innovation because of the lack of competitors. Of course Microsoft then struck back at Google claiming the merger would actually promote innovation, so who do you believe?

Yahoo flat out rejected the deal offered by Microsoft claiming it greatly undervalued the company. So why is this such a bold statement by Yahoo? Well now they will most likely be sued by there shareholders. Although Yahoo claims Microsoft under valued their company it still doesn't change the fact that there shares were hover around $21 and Microsoft was willing to pay $31 a share which would be great for the share holders.

This fiasco is becoming expensive for everyone. Yahoo is now risky being sued by there share holders, while Microsoft's stock is crashing. The price for a share of Microsoft before the Yahoo deal was offered was $32.60 while now it is at $27.71 a share. Microsoft is not going to just accept Yahoo's "no" they are going to try more aggressive tactics now.

Microsoft's New strategy in the attempt to take over Yahoo is to engage in a proxy battle. This would try to get Yahoo share holders to use there proxy votes to oust the board of directors of Yahoo. This new move by Microsoft is expected to cost between $20 and $30. But Yahoo responds to this move by passing a new severance plan for its employees. This would cost Microsoft anywhere from $1 billion-$3 billion onto of how ever much they paid to acquire Yahoo.

This is definitely going to be one expensive long battle for both Microsoft and Yahoo and we will have to wait and see who will give up first.

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