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Kevin Johnson, president of Microsoft's platform and services division, sent round an email on Friday to provide Microsoft employees of the Platforms & Services Division with an update on the company's Feb. 1 proposal to combine with Yahoo!

We bring you here at SYS-CON.com the text of Johnson's memo in full:

From: Kevin Johnson
Sent: Friday, February 22, 2008 12:48 PM
To: Platforms & Services Division
Subject: Update on Yahoo! Proposal

I want to provide all employees in the Platforms & Services Division with an update on our February 1 proposal to combine with Yahoo!, and answer a few common questions that have been asked.

As we’ve discussed, the online advertising industry is growing rapidly and is expected to be an $80B industry by 2010.  We believe our proposal is a compelling one and that the combination of Yahoo! and Microsoft creates a more credible alternative to an increasingly dominant player in the advertising industry.  We are committed to building great services for consumers while delivering great value to advertisers and publishers.  We have been very thoughtful about this combination, and are excited about what our two companies can do together to collectively target growth opportunities in online services, search, and advertising. 

It is important to remember that, while we have made what we believe to be a very compelling proposal for Yahoo! shareholders and employees, we do not have an agreement in place with Yahoo! at this time. While Yahoo!’s Board and management consider our proposal, let me share a perspective on the process going forward:

While Yahoo! has issued a press release rejecting our proposal, we continue to believe we have a full and fair proposal on the table.  We look forward to a constructive dialogue with Yahoo!’s Board, management, shareholders, and employees on the value of this combination and its strategic and financial merits.

If and when Yahoo! agrees to proceed with the proposed transaction, we will go through the process to receive regulatory approval, and expect that this transaction will close in the 2^nd half of calendar year 2008.  Until this proposal is accepted and receives regulatory approval, we must continue to operate our business as we do today and compete in this rapidly changing online services and advertising marketplace.

It is important to note that once Yahoo! and Microsoft agree on a transaction, we can begin the integration planning process in parallel with the regulatory review.  We can create the integration plan but we cannot begin to implement it until we have formal regulatory approval and have closed the transaction.  Because the integration process will be critical to our success as a combined company, we are taking this very seriously.  We have recent – and successful - experience in this arena, including our integration planning with aQuantive and Tellme, both of which led to successful combinations of talent, assets, and infrastructure. 

Our proposal includes a thoughtful integration planning process for a Microsoft-Yahoo! combination.  It is important to me that this process includes leaders from Yahoo! and Microsoft and is done in a way that enables us, together, to make decisions in a collaborative way.  Importantly, this will be an inclusive process with Yahoo! employees as they are a key part of our success as a combined company.

With the above process and timeline in mind, I want our teams to stay focused on existing commitments and goals.  We should continue to make progress against our plans for online services.

There has been a lot written about various aspects of our proposal.  And there are compelling opportunities and tough challenges ahead.  While it’s hard to predict the future, I want to convey my sense of where things are by responding to a set of common questions that have come up from employees. 

Next Page: Johnson Tells of the Benefits of the Potential Microsoft-Yahoo! Combination

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