SAN FRANCISCO (Reuters) - Microsoft Corp’s $44.6 billion bid for Yahoo Inc would use up its cash hoard, but the controversial move at a 62 percent premium might pay off if the company makes its savings targets -- and then some.

The software leader’s $31-per-share cash and stock offer “is very astute,” Sanford C. Bernstein analyst Charles Di Bona wrote in a research note, as Yahoo’s assets are worth $39 to $45 per share, much more than the offer price, if a restructuring unlocked the Internet company’s full value.

Investors sent Microsoft shares down 6.6 percent to $30.45 on Friday and Yahoo’s stock up 48 percent to $28.38, within $2.07 of the proposed offer price. The bid far exceeds the 35 percent to 40 percent premium typical in recent large deals.

Di Bona expects the unsolicited bid, if approved by Yahoo’s board, to reduce Microsoft earnings per share in the first year of combined operations and to be neutral in the second year.

The deal will use up Microsoft’s more than $21 billion in readily-available cash. “While a considerable amount of money, the deal makes strategic sense for Microsoft as it has failed to adequately monetize its brand on the Internet,” Citigroup analyst Mark Mahaney said in an investor note.

Microsoft would have to achieve $1.6 billion of cost savings and other efficiencies, such as eliminating duplicative research and development efforts, for the deal to break even in Microsoft’s fiscal year ended June, 2009, Bear Stearns analyst John DiFucci wrote in a research note.

That scenario assumes Microsoft generates more than $600 million in interest income and issues new shares to pay for half the $44.6 billion price tag.

Microsoft executives said on Friday they expect $1 billion in such “synergies” from the deal, which DiFucci calculated included investments in assets such as data centers.

If the $1 billion savings goal was not met, the deal would reduce Microsoft’s earnings per share by 12 cents in its fiscal 2009, he said. Microsoft earned $1.42 before certain items in fiscal 2007.

In pre-market trading on Friday after Microsoft made public its bid, Yahoo’s market value increased by $13.7 billion and Microsoft fell by about $11 billion, resulting in a net gain of about $2 billion for a combined entity, said Narayanan Jayaraman, a professor of finance at the Georgia Institute of Technology College of Management.

“It’s a value-increasing proposition,” Narayaman said in an interview. “Investors feel that the combined value is higher” than if the companies remained separate. “It’s a fair valuation.”

Shares of Internet search leader Google Inc fell 8.6 percent on Friday, indicating investors believe the combination of Microsoft and Yahoo may offer tough competition for the high-flying search company.

“The market must believe that Microsoft’s decision is a good one because it is strategic, and a good way to catch up with Google’s market share in online advertisement,” Narayaman said.

Still, some analysts doubted that Microsoft shareholders would get their money’s worth under the proposed takeover, as Yahoo warned this week that it faced “head winds” in 2008 amid a weakening economy, forecasting revenue below analysts’ expectations.

“The premium is exorbitant for what is a dwindling business,” said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC.

Sanford Bernstein’s Di Bona calculated that even at a 62 percent premium, Microsoft’s offer could generate a return on investment of 13.9 percent, assuming Microsoft can achieve “modest revenue and meaningful cost synergies.”