Microsoft made a $44.6 billion dollar bid on Yahoo on 1 Feb 2008. The unsolicited offer was made through a letter to Yahoo's Board of Directors, in which, Microsoft stated a desire to acquire all outstanding shares of Yahoo! common stock at the rate of $31 a share. This would be payable in $31 cash or 0.9509 of a share of Microsoft common stock.

Microsoft Chief Executive Officer Steve Ballmer is attempting the biggest-ever technology takeover after failing to compete with Google in a market that may almost double to $80 billion by 2010. Microsoft's shares have dropped more than 40 percent since Ballmer took over from co-founder Bill Gates in 2000.

Search functionality and the ability to keep up with Google is behind the desire to combine these two. According to the Search Engine Journal, Microsoft's decision to split it's search up into Live Search and MSN search not only confused it's users, but it killed it's market share. Spammers and blackhatters, who use controversial and questionable, sometimes even illegal means to get their sites high in the search results, have been doing quite well with Microsoft search. The merging of these two would likely put an end to their favorable search engine rankings.

Yahoo has unsuccessfully tried to compete with Google, yet has suffered declining profits for two straight years. This week has been particularly bad for the company as they reported a 23 percent drop in fourth-quarter profits. This prompted the company to announce their intentions to cut 1,000 of their 14,000 strong workforce. Microsoft's offer may just be news investors were looking for as Yahoo shares were sent climbing on the NASDAQ Stock Exchange.

Although Yahoo stated that they would take an immediate and thorough look at the offer, the deal is far from being complete. Microsoft has long been targeted by antitrust regulators in the U.S. and Europe. According to CNNMoney.com, the U.S. Justice Department has stated that it would take a close look at the antitrust implications

A Microsoft takeover of Yahoo! would be aimed at rivaling Google for search traffic and display advertising business. While Yahoo! is the number one destination online, larger numbers of internet users are going to Google for search functions. Google is not just a search engine, it's a verb. The term "Google it" has become so commonplace that they are often the first and only search engine used by consumers.