It’s been rumored for a long time, but now it’s reality. Microsoft has made an unsolicited $44.6 billion bid for Yahoo. The bid, which would consist of cash and Microsoft stock, values Yahoo shares at $31 a share, a 62% premium on Thursday’s closing price. Michael stated during his appearance on Fox Business this week that Yahoo could face a takeover by Microsoft as part of an ad play, and he was right. Microsoft cites online advertising as being one of the key benefits of the acquisition … Microsoft + Yahoo = a stronger competitor to the Google borg. — Duncan Riley, TechCrunch

Microsoft + Yahoo = Big Mess? …we’ve compiled a list of existing Yahoo services and matched it with existing Microsoft offerings. It’s an astounding number of overlaps. Of course there’s many more services from Microsoft without Yahoo equivalents (ex. Office Live). Now imagine for each and every one of these you have to make a decision – to keep it as is, integrate Yahoo’s into Microsoft’s, integrate Microsoft’s into Yahoo’s or even come up with a new hybrid. Simple branding aside, I think the developers are going to have to work quite a few late nights to integrate what I believe are two monolithic systems together. Whatever they do, they better not ruin Flickr. —

The inside word from Microsoft. We spoke with a senior executive at Microsoft about several issues concerning the Yahoo bid. Here’s the inside take: [Yahoo CEO] Jerry Yang’s initial reaction to [Microsoft CEO] Steve Ballmer’s call last night? Polite. He obviously has to consider it. Will AT&T or Google try to make a play? AT&T encouraged us to make the bid. They have no interest in buying Yahoo themselves. — Henry Blodget, Silicon Valley Insider

How NOT to make this a disaster. We think a straight acquisition of Yahoo (YHOO) by Microsoft (MSFT) would be a disaster. However, we also think the fundamental premise for the merger is sound and that the companies should combine forces. Furthermore, we think there’s a way to do this that would be a win for both companies’ shareholders. To wit: 1. Jerry, fly up to Redmond this afternoon and have dinner with Steve. Just the two of you. No bankers, no lawyers, no colleagues, no advisers. — SVI

Microsoft’s ad play. …Yahoo represents a new growth opportunity for Microsoft in advertising revenues and online services. During the last four quarters, Microsoft’s revenues for its online services (MSN, Windows Live, aQuantive, etc.) were $2.8 billion and it lost $949 million. So just combining Yahoo with that business, you get revenues of $9.8 billion, but Microsoft would still be showing a net loss for that business of $289 million. But 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 (which is appealing to advertisers, who see all those eyeballs as valuable inventory). — Eric Schonfeld, TechCrunch

Why Microhoo: To stop the Google machine. I am on the conference call with Steve Ballmer (CEO), Chris Liddell (CFO), Kevin Johnson (President PSD), and Ray Ozzie (Chief Software Architect). Chairman Bill Gates is sitting this one out, a sign of his pending departure from the day-to-day grind in Redmond. We have been talking about this combination for a few years, ever since Google ran away with the search business. Microsoft and Yahoo also have an interest in the social networking business–both tried to acquire the Facebook and Microsoft ended up investing $240 million. The timing is right for Microsoft and Yahoo shareholders. Yahoo stock is depressed and the outlook for price growth isn’t optimistic. — Dan Farber, Between the Lines