BBC reports that Microsoft has offered to buy Yahoo!

The company is willing to pay US$ 44.6bn in cash and shares.

Microsoft’s Kevin Johnson says that the two companies combined can better compete with Google.

“Today the market [for online search and advertising] is increasingly dominated by one player,” he says.

The offer comes at a moment when Yahoo! is struggling.

Yahoo chief executive, Jerry Yang, has announced that he intends to lay off 1,000 employees as part of a restructuring plan. Yahoo! shares have fallen dramatically.

Microsoft tried to get Yahoo! on board a year ago, but Yahoo declined. But at that time Yahoo! had much more self-confidence.

Does it make sense for Microsoft to buy Yahoo?

Actually it does, and very much so, which is why we at Pandia has recommended such a move for a long time.

With one notable exception (the MSN Messenger in Europe) Microsoft has not managed to break the World Wide Web code. The company is still too entrenched in its sale of regular software mode.

Although the company has managed to develop a relatively decent search engine, Microsoft has not been able to brand it or give it an identity that makes it a real competitor to Google.

Although Yahoo! is struggling, it has a good search brand. Uniting Live and Yahoo! under the Yahoo! banner will give the new united search site a stronger position in the market.

Moreover, Yahoo! has content, and lots of it. Microsoft may give Yahoo! the capital needed to stay the most important portal or destination on the Web.