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Microsoft has offered $44.6 billion to buy Yahoo in a cash-and-stock deal. Here are highlights from the conference call Microsoft is holding to discuss it.
 5:35 a.m. Pacific: Steve Ballmer calls offer "significant." He called Yahoo CEO Jerry Yang last night to discuss it. A year ago, Yahoo management it "wasn't the right time" to discuss an acquisition.
5:37 a.m.: Kevin Johnson, who heads up Microsoft's Windows business and led its acquisition of aQuantive and the investment in Facebook, is talking about online-advertising industry economics. He describes it as a "scale" business in the areas of search advertising and ad serving. "Requires significant investments" in technology and infrastructure" leading to "a period of consolidation." The market is "dominated by one player" — he's obviously talking about Google. In other words, the antitrust argument has already begun.

5:41 a.m.: Johnson is discussing operational "redundancies." Translation: When it comes to layoffs, Yahoo ain't seen nothing yet.
5:42 a.m.: Ray Ozzie, Microsoft's CTO, is giving a high-minded speech about how the Web has "transformed society." Derides search as "10 blue links," says the Web has evolved to "social media." Which would sound less like sour grapes if Microsoft were successful in either field. He ends with reference to "magic of software."
5:45 a.m. Microsoft CFO Chris Liddell says the company hopes to close the deal in the second half of the year. For Yahoos, that means at least 5, up to 11 months of uncertainty. Should be a field day for Valley recruiters.
5:47 a.m. Questions are starting. Why buy Yahoo, since you already bought aQuantive? Answer: Scale.
5:49 a.m. Question: Revenue synergies have been elusive in software deals. Kevin Johnson fields this one. Answer: Revenues are from advertising, not traditional software. "Scale economics" drive yield in both search and display advertising.
5:51 a.m. Ballmer: "We've been losing money. Our plan is not to lose money in the future."
5:53 a.m. Johnson: Advertisers have been giving Microsoft "unsolicited" praise for the offer. They want a No. 2 in the market, he says.
5:55 a.m. Microsoft-Yahoo can be "more efficient" with engineers working on search. Translation: More layoffs!
5:57 a.m. Question: Why not just spend more on R&D? Answer: Time to market.
5:58 a.m. Question: Why not wait until it could be a friendly offer? Answer: "We look forward to the dialogue."
5:59 a.m. Question: What happens to the MSN and Live brands? Johnson: "We love the Yahoo brand." Microsoft will "go through a process" to determine what to keep. Ballmer: "There will be a Windows Live. There will be an Office Live.... Yahoo those are all powerful brands." Sounds like MSN might be dropped.