Let the rumors rest in peace.

Microsoft today announced a $44.6 billion bid for Yahoo, looking to combine forces in a move to combat Google's dominant position in search and Internet advertising.

"This is a decision we've thought, and I've thought, very long and hard about," Microsoft CEO Steve Ballmer said during a conference call discussing the bid.

"We ... see this announcement as the next major milestone in Microsoft's transformation," Ballmer said. "If you look at Microsoft and Yahoo, our companies really do share a vision for Web services, and advertising specifically."

Yahoo responded in a statement, indicating that it would evaluate the terms of the unsolicited, $31-per-share proposal. The half-cash, half-equity offer represents a 62 percent premium over Yahoo's trading value at close on Thursday.

Yahoo shares jumped more than 47 percent in early trading on news of the bid.

Microsoft has long been at the top of the short list of companies with the resources to bid on Yahoo, which has been pummeled by rival Google in the areas of search and advertising. Yahoo and Microsoft have also long been rumored to be in acquisition talks.

With today's announcement, Microsoft didn't pull any punches about which company it's aiming to counter.

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"Today the [search and advertising] market is increasingly dominated by one player," said Kevin Johnson, president of Microsoft's platforms and services division. "We can offer a more competitive choice for consumers, advertisers and publishers."

For Microsoft, the bid is largely about building its ad business on top of the foundation laid by last summer's $6 billion acquisition of aQuantive. That acquisition funneled in a huge body of advertisers, and improved its ad-serving capacity for publishers, but one leg of the tripod was still short.

"There was no consumer face" to that acquisition, Ballmer said. Snapping up the portal giant, one of the most-trafficked sites on the Web, would change that in a hurry.

Johnson said Microsoft sees three areas where it will benefit from the merger: scale, technology and infrastructure.

"The online advertising industry is an industry where scale matters," he said. "By aggregating critical mass of inventory on a single ad platform, it enables that platform to drive higher yield for publishers."

But building and maintaining that business on an ever-growing scale creates software problems, which Johnson said would be addressed by integrating the two engineering teams.

Ditto with the infrastructure -- combining the two companies' server farms would create a processing-power factory for faster and better search that would be the nearest rival to Google's vast array of server warehouses.

Ballmer said that Microsoft has been in talks with Yahoo executives for 18 months about a possible acquisition. A year ago, Yahoo rejected an offer from the company, saying that the timing was not right.

He added he believes Microsoft's current proposal offers a strong value for Yahoo shareholders, and that he spoke to Yahoo CEO Jerry Yang last night in advance of the public announcement. He did not discuss Yang's reaction.

The blockbuster bid comes less than a month after Yang outlined his vision for a sweeping transformation of Yahoo while at the Consumer Electronics Show, and again on this week's earnings call.

Taking the helm from former CEO Terry Semel last year, Yang faced the challenge of turning around an Internet powerhouse that many viewed as having lost its way.

With Google's share of the search market growing unchecked, the new Yahoo Yang described would become the "indispensable starting point" on the Web, something like a grand switching station that would draw people in with the promise of unifying the increasingly fragmented Web.

With a souped-up inbox and the Yahoo Life initiative, the portal giant hoped to link up people's experiences on various social networks, blogs and content sites throughout the Internet's long tail. The smarter inbox would be able to prioritize contacts by relevance and facilitate intelligent, dynamic conversations. Another series of announcements made it clear that mobile figured prominently in Yahoo's future.

Conspicuously absent from Yahoo's recently proffered growth opportunities has been much talk about the business of search advertising.

Today's announcement seems like a formal acknowledgment of what has long been unsaid: That no one company can hope to mount a competitive challenge to Google at this point. In that light, combining the second- and third-largest search providers to take on No. 1 may simply make arithmetical sense.

The other companies whose names were whispered as potential suitors for Yahoo were mostly media conglomerates, heavy hitters like Viacom, News Corp, Time Warner and NBC. How has the news been received in the media world?

"The reaction from publishers, which is a lot of media companies, is very positive," said Brad Smith, Microsoft senior vice president and general counsel. Smith added that Microsoft had already received unsolicited feedback this morning from many third parties praising the move.

He also noted that there was one company automatically precluded from any talk of a potential acquisition.

"Given that Google has roughly a 75 percent market share in paid search advertising," Smith said, the company would be "prevented by the antitrust laws from acquiring Yahoo."

However, anticompetitive concerns will likely play a major role in the acquisition review, provided Yahoo accepts. If all goes as planned, Microsoft hopes to have the antitrust review concluded by the end of the year.

The announcement has already drawn protests from the Center for Digital Democracy, an outspoken consumer-advocacy group that has campaigned vigorously against Google's own acquisition of DoubleClick. That deal has been approved by the Federal Trade Commission and is under review by the European Commission.

With the CDD describing a potential Microsoft-Yahoo merger as creating a "powerful Internet duopoly," a vigorous lobbying campaign from it and other consumer groups also seems likely.

In a separate announcement late Thursday, Yahoo said Terry Semel, the company's former CEO and current chairman, would step down from the board of directors, effective immediately. Succeeding Semel as chairman will be Roy Bostock, who has served on Yahoo's board since May 2003.