Microsoft execs point to synergy

Empty

Related: Street weighs in on Yahoo bid

NEW YORK -- "Synergy," the buzzword made famous in such big industry deals as the AOL-Time Warner combination, was one of the key phrases that Microsoft executives used repeatedly in a Friday morning conference call detailing their proposed Yahoo acquisition.

Analysts in first reactions said the comments were big on such words and vision, but light on specifics.

The Microsoft executives in their call focused mainly on synergies between the firms on the engineering and advertising fronts, but they also provided some color on how the deal came about.

Microsoft CEO Steve Ballmer pointed to the deal as "the next major milestone in Microsoft's companywide transformation to embrace online services overall and to invest very successfully in search and advertising."

He said his company has been engaged in conversations with the embattled portal for 18 months, and Microsoft first approached Yahoo last year with an acquisition bid. After speaking with Yahoo founder and CEO Jerry Yang on Thursday night, Ballmer said that Microsoft felt it was the right time to go public with its bid.

"A year ago, Yahoo said it wasn't the right time," Ballmer said. "We believed then in the benefits and we believe in them now more than ever. That's why we're making it public today."

Microsoft brass in its call Friday also admitted that, with Google's market share in Web advertising and search becoming more dominant each month, a combined Yahoo/Microsoft team is needed to mount a challenge.

"Today, the market is increasingly dominated by one player," said Kevin Johnson, the president of Microsoft's platform and services division, alluding to Google. "By combining assets, we can offer a more competitive choice for consumers, advertisers and publishers. The industry will be better served by having a more credible alternative."

Johnson offered few details of what the deal could mean, specifically, for the two companies' business models, but he repeatedly referred to the "synergies" that he saw between the two companies. Microsoft CFO Chris Liddell said their value would be "at least a billion dollars."

One of the biggest positives, Johnson noted, was that the companies would combine their engineering resources and focus it on "emerging user experiences." He pointed to video, mobile, online commerce and search areas for the combined talent to focus on.

Online advertising also would be positively affected, Johnson said, and that could be one of the first areas in which shareholders and partners see an increase in valuation.

"The online ad industry is one where scale matters," Johnson said. Both companies would benefit from "aggregating critical mass of inventory on an ad platform."

Johnson said the combined management team would include leaders from both companies and would be based on his company's integration with Aquantive, the ad tech firm Microsoft bought last year.

Ballmer pointed to the Aquantive acquisition as a part of this process, as well, but noted that deal was more focused on benefits for advertisers and publishers. With the Yahoo acquisition, consumers would feel a positive impact, he said.

"From a consumer perspective," Ballmer noted, "there's no better way to increase scale and capacity than this acquisition."

The Yahoo deal would be Microsoft's largest acquisition ever by far and one of the biggest Web-focused transactions ever. To date, Microsoft's biggest acquisition was the one of aQuantitive for $6 billion in May.

The company last year also bought a 1.6% stake in Facebook for $240 million.

Marcos Sahm in New York contributed to this report.
comments powered by Disqus