The rumors were true: Microsoft has formally offered a bid of $44.6 billion for ailing web giant Yahoo. The offer works out to a price of $31 per share of Yahoo stock--a 62 percent premium over yesterday's closing price. "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," Microsoft CEO Steve Ballmer wrote in the proposal to Yahoo's board of directors.

Speculation surrounding the deal has long characterized Microsoft's bid to buy Yahoo as an attempt to counter Google's increasing web-based advertising dominance. Ballmer seems to confirm this in his letter: "Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers."

Of course, this is far from a done deal. Even if Yahoo accepts, the deal will have to clear a number of hurtles, many pertaining to U.S. regulatory scrutiny. Nonetheless, Microsoft has finally made its intentions known--will Yahoo respond in kind?

For more on the proposed deal:
- read the full letter at the New York Times
- and see this Ars Technica article