by , 7:50 AM EST, February 1st, 2008

Microsoft took a big swing at Internet giant Google on Friday when it presented a US$44.6 billion buy out offer to Yahoo. The two companies have not been able to overtake Google on their own, but acquiring Yahoo would put Microsoft in a much more competitive position.

Microsoft CEO Steve Ballmer stated "We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."

Google's strong position in the online search and advertising market has left Microsoft and Yahoo in the dust despite both companies efforts. By combining forces, Microsoft hopes to be able to take a bigger slice of Google's online advertising pie.

Microsoft's Platforms & Services Division president Kevin Johnson added "The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers."

Microsoft expects that the online advertising market will climb to $80 billion by 2010, doubling the $40 billion market of 2007 -- and by buying Yahoo the company projects it can generate an additional $1 billion a year, or as Microsoft called it, "annual synergy."

The acquisition offer comes only days after Yahoo reported a 23 percent drop in earnings, warned investors that the rest of 2008 didn't look promising, and announced that it was laying off about 1,000 employees.

The Redmond company isn't expecting any regulatory issues and, assuming Yahoo's Board of Directors and shareholders approve the deal, hopes to complete the half cash-half stock transaction in the second half of 2008.