Since the middle of 2005, software giant Microsoft has made attempts to purchase Internet portal Yahoo. Over the past year and a half, the merger has taken on an on-again/off-again character. That the merger talk will not fade away speaks to the perceived benefits of the merger, for Microsoft in particular. There are substantial strategic gains to be made for Microsoft. The software specialist has tried to establish itself as a leading portal, but has not achieved the success of portal giants Yahoo and Google. The possibility exists that the traditional software industry could undergo a radical change in coming years as traditional computer technology becomes ever more portable. For Microsoft, this raises the specter that while the Internet is unlikely to change, the methods and technologies that people use to interact with it may change, to Microsoft's detriment. This provides Microsoft with the strategic impetus for merger.
             From the perspective of Yahoo shareholders, the deal has thus far been less than enticing. Traditionally, the purchasing company pays a significant premium over the current market value in order to acquire the target. In this case, Microsoft, spurned after years of negotiations for a friendly takeover, launched an unfriendly takeover bid on February 1, 2008. The software giant offered $44.6 billion, in a combination of cash and stock. This figured amounted to $31 per share of Yahoo, a 62% premium over the prevailing Yahoo stock price (Levy & Bass, 2008).
             For Yahoo shareholders, this offer was probably generous. The value of Yahoo stock had eroded significantly to that point, losing half its value in the previous two years. This was a result of Yahoo's inability to beat Google at Internet search, which had resulted in declining profit (Ibid.). Yahoo shareholders would receive a combination of cash and stock. Microsoft's stock dropped as a result of the bid, due in part to analyst pe...