To boost its odds in the online services market, Microsoft Corp. announced Friday it will offer US$44.6 billion in cash and stock for search engine operator Yahoo Inc.

The unexpected announcement shows Microsoft's ambition in seeking new ways to vie more effectively against the search and online advertising powerhouse Google Inc.

According to a letter to Yahoo's board of directors, Steve Ballmer, Microsoft Chief Executive, stated that the company “will bid $31 per share, representing a 62 percent premium to Yahoo's closing stock price Thursday.” He also emphasised that the deal isn't subject to financing.

Based on the proposed deal, Yahoo shareholders could receive either cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock, Media InfoCenter reported.

Microsoft said it foresees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. It believes that the deal would receive clearance and close in the second half of 2008.

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