Not being satisfied of its monopoly in the system software market, Microsoft wants to establish its hegemony in the online services sector also. Despite spending heavily on building its own search engine and advertising technology and even acquiring the online advertising specialist aQuantive for a whopping $6 billion, Microsoft’s online services has not been able to reduce the monopoly of Google. While Google retained 77% of the online services market pie Microsoft had a paltry 3.7% of the market share. To expand its market share the international giant has decided to work out policies of mergers and acquisitions and that with none other than another big name in the sector - Yahoo.

On Friday, Microsoft had announced that it is willing to offer $44.6 billion in cash and stock to Yahoo in what is being termed as the biggest ever acquisition by Microsoft. With Yahoo’s share prices closing at $19.18 on Thursday, the offer gives a 62% premium at $31 per share. Microsoft believes that the acquisition will increase their combined efficiency at reduced cost and saving $1 billion annually.

The pertinent question that remains is whether the acquisition will enable Microsoft to snatch the online services monopoly from Google whose popularity is deeply entrenched in the virtual world with the word ‘google’ entering dictionaries worldwide. With Yahoo retaining around 17% of the online market share, the combined share of Microsoft and Yahoo is far behind Google’s 77% market share. In fact, Microsoft has been trying for nearly two years since late 2006 to make Yahoo agree to its merger proposal. After considerable dillydallying, the reluctant Yahoo CEO Jerry Yang is believed to be considering the proposal from Microsoft CEO Steven Ballmer with all seriousness. Plummeting equity prices seem to have unnerved Yahoo.

What remains to be seen is Google’s reaction to the news of this grand acquisition. Current scenario does not seem that the company will become jittery from any combined move by Yahoo and Microsoft.

Source:IHT