Microsoft buying Yahoo : What it means for the rest of us

Microsoft could not have chosen a better time to close on Yahoo! The world's biggest tech company will almost certainly snap Yahoo for a bargain price, after the the later's share prices fell by nearly 32 percent compared to one year ago.

While the rest of the internet-related company - including Google - were feeling the pinch as the US economy slowed down, Microsoft went from strength to strength, posting record earnings and profits.

Yahoo's stock has been particularly hit as the company disclosed less than stellar earnings and profits and saw its Chairman Terry Semel leave the company together with hundreds of other employees.

At $25.63 billion, Microsoft's offer of $44.6 billion represents a nice premium but also a worthy investment that brings to Microsoft some of the most recognised and respected brands on the internet.

The price is seven times more than Microsoft paid for Online advertising powerhouse aQuantive but to put things into perspective, Microsoft's gross annual revenues for 2007 was $51.12 billion with a gross profit of $40.29 billion.

A Microsoft-Yahoo merger will close the gap with Google. Yahoo is still one of the most visited websites on the internet with more than 130 million unique users per month and with the online advertising market expected to reach $80 billion in 2010, it is a now-or-never opportunity that Microsoft has judiciously seized.

One of the reasons Microsoft put forward to validate the unsolicited bid is the fact that both companies will not only have a lot in common, but they would also stand a better chance to fight Google and save money.

Microsoft estimates that they would save up to $1 billion through the acquisition; Yahoo has acquired Rightmedia and just before Microsoft's offer, had purchased Maven Networks.