The offer, as it stands, is for half cash, half stock, so Microsoft needs $22.3 billion in stock, and $22.3 billion in cash.

The stock is based on Microsofts closing price on January 31 of $32.60, so we are talking 684,049,080 shares, or just over 2/3 of a billion shares of Microsoft stock. If I understand how to read a stock summary (and I dont, so correct me if necessary), Microsoft holds 1.3 billion of its own shares, so giving Yahoo almost half of those would still leave the company with plenty for its own purposes.

As for the cash, Microsoft has $21.076 billion on hand, but CFO Chris Liddel says it could use all of its money to cover most of the $22.3, which pretty much means it wont. Id expect Microsoft to spend half its cash, or 10.538 billion, leaving another $11.762 billion to cover the rest. Liddell says the company will borrow money, the first time it has done that.

Luckily, Microsofts a pretty healthy company. The company pulled in $5.8 billion in cash in just its last quarter, so give it a year, Microsoft could pay off that debt and still have plenty of spending money. Yahoo is profitable too, and hopefully, under Microsoft, even more profitable, so Yahoo is definitely something Microsoft can afford.

That question out of the way, we just have to wonder if Microsoft can make this work, turn Yahoo+Windows Live into the Google killer it keeps hoping for.

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