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MICROSOFT BID A REAL POWER PLAY

Yahoo would give it muscle against Google.

In making an unsolicited $44.6-billion bid for Web pioneer Yahoo Inc., Microsoft Corp. is trying to get a bigger piece of the fast-growing Internet advertising business and counter the growth of archrival Google Inc.

But along the way, the deal - if successful - could also dramatically change the way that many consumers and businesses use the Internet.

"This is an acknowledgement by Microsoft that the Internet is a force that will change the way computing happens," said Bob Dutkowsky, chief executive of Clearwater's Tech Data Inc.

Users of Yahoo's search, music, video and news sites, for instance, could see their accounts transferred to Microsoft services. Eventually, they might even see their Yahoo and Hotmail e-mail and instant messaging accounts merged.

The biggest change, though, would be in the Internet search business. Suddenly, Microsoft would become a more formidable player in an area where it has traditionally struggled.

"If I was Google I'd be a little bit concerned," said Dustin Wells, founder and CEO of Headspring Systems, a software consulting company in Austin, Texas. "This would give Microsoft a lead of about two years from where they would be without it."

Businesses that advertise on the Web would see Microsoft's share of the U.S. search business going to 33 percent from about 10 percent, according to figures from tech research firm comScore Media Metrix. Google is, by far, the biggest search engine, handling more than 58 percent of all Internet searches.

And while Google dominates the market for text-based ads on the Web, a combined Yahoo-Microsoft would have about 25 percent of the market for display ads on the Web, compared with about 1 percent for Google, according to comScore.

"You'd go from a fragmented situation with Google having about 60 percent of the market and where (advertisers) could ignore everybody else, to one where Microsoft has (almost) 35 percent of the market and you'd have to advertise on two players," said Matt Rosoff, an analyst with Directions on Microsoft, an independent tech research firm in Kirkland, Wash.

The move also could result in new types of software products for consumers, some observers say.

With a combined company, developers of third-party software applications could integrate the best of what Yahoo has - search and display ads, for instance - with the best of what Microsoft has, such as office-related applications like Word or Excel.

"Adding Yahoo to the mix strengthens the Microsoft message ... and makes picking Microsoft a little easier," said Tony DiBenedetto, CEO of Tribridge Inc., a Tampa software consulting firm and Microsoft partner with offices in Atlanta, Fort Lauderdale and Austin.

"In the beginning, the Internet was an interesting way to look up stock quotes," Tech Data's Dutkowsky added. "Now companies can run their entire businesses over the Internet."

In announcing the unsolicited bid early Friday, Microsoft chief executive Steve Ballmer said the combined companies would create "an incredibly efficient and competitive offering for consumers, for advertisers and for publishers."

"It really represents a transformation of our business," Ballmer said in a conference call with Wall Street analysts. "The Windows experience needs to increasingly embrace the Internet."

Along with being a leading Internet site, Yahoo has been pushing hard into Web-based services for phones and other mobile devices. Such initiatives could also be key for Microsoft going forward, especially since Google also is making aggressive moves into the mobile phone business.

Of course, a combined Microsoft-Yahoo is anything but guaranteed. In addition to getting approval from Yahoo shareholders, Microsoft would likely have to get approval from antitrust regulators in the United States and Europe.

In a statement, Yahoo said its board of directors would evaluate the proposal "carefully and promptly."

In a letter to Yahoo's board of directors, Ballmer pointed out that Microsoft's proposal of $31 per share was a 62 percent premium over Yahoo's stock price on Thursday.

It also comes after Yahoo announced a 23 percent drop in quarterly earnings and laid off 1,000 workers as it struggles against Google.

Investors appear confident an agreement eventually will be reached. Yahoo shares climbed $9.20, or nearly 48 percent, to $28.38 Friday while Microsoft shares fell $2.15, or 6.6 percent, to $30.45. Google shares fell $48.40, or 8.6 percent, to close Friday at $515.90.

One Florida resident was watching Friday's news with particular interest. State Sen. Jeremy Ring, a Democrat from the Fort Lauderdale area, was the first salesperson hired at Yahoo in 1995.

"I launched its East Coast operations out of my apartment," he said.

Having left the company in 2001, Ring watched Yahoo's decline over the past year with dismay.

"I think it's a great deal and they clearly can't turn it down," he said. "But it's disappointing it had to come to this."

Information from Times staff writer Kris Hundley and Cox News Service writer Bob Keefe was used in this story.

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