WASHINGTON: The bold bid unveiled Friday by Microsoft for Yahoo would create a technology titan of unprecedented size to challenge the Internet leadership established by Google, analysts said.

The 44.6 billion-dollar bid, the biggest ever in the tech sector, is what is known as a "bear hug," since it represents a premium so large -- around 62 percent -- that investors and board members may find it hard to resist.

Although Microsoft is the dominant force in personal computer operating software with its Windows platform on some 90 percent of PCs worldwide, a tie-up with Yahoo could help the firm created by Bill Gates reposition itself amid a changing tech landscape with more applications moving online.




"It's clear that Microsoft is facing increased pressure from their competition with Google and this is a bold move for them to make, especially given (chief executive Steve) Ballmer's disdain for doing large acquisitions like this," said Michael Gartenberg, analyst at Jupiter Research.

Erick Schonfeld of the website TechCrunch said: "This is an advertising play for Microsoft. It wants to combine the scale of its recently acquired advertising networks with that of Yahoo's, along with Yahoo's vast consumer reach."

Greg Sterling of the website Search Engine Land added that "it would appear the chief motivations for Microsoft are acquiring Yahoo's brand, its traffic and its advertiser relationships."

The deal could reshape the landscape for high technology by combining Microsoft and one of the leading brands on the Internet.

Citigroup analyst Mark Mahaney said Microsoft's bid "makes sense" from a broad Internet perspective.

"For Microsoft, or any other company seeking to gain scale in Internet advertising, Yahoo is an obvious strategic choice given its position as one of the top three Web properties worldwide," Mahaney said in a research note.

He said that if Yahoo wanted to remain independent, it will have to show investors that it is willing to take "radical, value-creating steps."

The news comes as Google awaits European approval for its deal to buy online advertising group DoubleClick for 3.1 billion dollars that would extend its leadership in the Internet ad sector.

While Google has been best positioned, as the Internet search leader, to profit from Internet advertising, its rivals are not giving up.

"For years, Microsoft has been trying to make progress in the search and advertising areas, but little progress has been made," said Kimberly DuBord, analyst at the research firm Briefing.com.

"It's lost out on what could have been key strategic deals in the past. All three companies are aiming to become one-stop shops for companies that want to advertise on the web. To achieve this goal, they need traffic and the ability to match ads with search queries."

Yahoo said it was examining the "unsolicited proposal" and added that its board "will evaluate this proposal carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."