Microsoft offered to buy Yahoo for $31 per share, a 62 percent premium over Yahoo's closing stock price on Nasdaq Thursday. Yahoo shares jumped to $30.75 in premarket trading.
Yahoo said the online advertising market is growing rapidly and expected to reach nearly $80 billion by 2010 from over $40 billion in 2007. Yahoo added it is "increasingly dominated by one player," referring to Web search leader Google.
"We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," Microsoft Chief Executive Steve Ballmer said in a statement.
Yahoo was not immediately available for comment.
The company has been losing market share to Google and warned earlier this week that it faced "headwinds" in 2008, forecasting revenue below Wall Street estimates.
On Thursday, Yahoo disclosed that nonexecutive Chairman Terry Semel was leaving the board, ending its formal ties with the former chief executive, who is credited with reviving the company and then losing touch. read full story