Will Yahoo tango to the tune?

To better address Google's dominance in search and online advertising, Steve Ballmer of Microsoft has made an unsolicited bid to purchase Yahoo for $44.6 billion.

That amounts to $31 per share of Yahoo, whose market value hovered just below $20 each as of market close yesterday. But since news of the proposal was announced this morning, Yahoo's share price leaped $9.42 to $28.60.

According to fund manager Thomas Radinger of Pioneer Investments in Munich, "Microsoft is under massive pressure to […] fend off competition from rivals such as Google and this deal shows how desperate they are. [The bid is] a huge gamble as the price is very steep and it will take years to successfully integrate such a massive acquisition."

Microsoft says the merger would save the combined entity $1 billion a year, The New York Times reports.

According to Bloomberg, Yahoo's failure to compete with Google in search and online advertising has led to eight quarters of lost profits and investor impatience with the company's management. The stock fell by half in just two years.

The return of Jerry Yang as CEO marked a ready determination to reignite Yahoo's dominance as a source portal. But its most recent earnings release reflected profits of $205.7 million for 2007, still down from $268.7 million the year before.

This year, Yahoo will lay off its seven percent of its workforce — over a thousand employees.

In December Google comprised 58 percent of search share, nearly double the combined share of Microsoft and Yahoo. And yesterday, marking its 14th consecutive quarter exceeding 50 percent growth, Google reported a 52 percent rise in Q4 sales.

Microsoft, which consistently trails behind Google and Yahoo in search dominance, has a historical propensity to keep its enemies close. In October it purchased 1.6 percent of Facebook for $240 million. And its online ad revenue has steadily grown, due in part to strategic purchases like aQuantive and Massive.

If Yahoo accepts its offer, it will mark the largest technology takeover in history. Microsoft is confident the deal would meet regulatory approval before 2Q08.