Yahoo Chief Explains Rejection of Microsoft Bid
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Jerry Yang explained his companyâs rejection of Microsoftâs buyout offer in a letter to shareholders late Wednesday outlining why he believed the bid was too low.
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NEW YORK/SEATTLE  - Yahoo Inc on Monday rejected  Microsoft Corp's unsolicited $41.6 billion takeover offer as  too low, forcing the software maker to either sweeten its bid  or adopt a hostile approach to clinch a deal.
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Microsoft Corp  said on Monday  that Yahoo Inc's  rejection of its initial offer to buy  the company was "unfortunate," but it does not change its  belief in the merits of its proposal.
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Yahoo CEO Jerry Yang cited the growing online advertising market and his company&#39;s position to take advantage of that growth as reasons for shareholders to&#160;reject Microsoft&#39;s acquisition bid, he said in a letter to shareholders Wednesday.
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Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.
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Yahoo CEO Jerry Yang cited the growing online advertising market and his company&#39;s position to take advantage of that growth as reasons for shareholders to&#160;reject Microsoft&#39;s acquisition bid, he said in a letter to shareholders Wednesday.The letter, the contents of which Yahoo made public Wednesday, stated that&#160;Microsoft&#39;s February 1, $44.5 billion unsolicited takeover offer&#160;was too low. Yang said that Yahoo is the most visited site in the United States, held the top position in online display advertising, and counted almost one out of two of the world&#39;s Internet users as its members. He also said Yahoo is the top mobile destination in the U.S.Yang did not cite sources for most of his claims. However, comScore Networks research from November 2007 confirmed Yahoo&#39;s online display advertising leadership, with almost 19 percent of the market.The online ad market is expected to grow from $45 billion last year to $75 billion in 2010, Yang said, and that Yahoo wanted &quot;to take advantage of what we see as a unique window of time in the growth -- and evolution -- of this market to build market share and to create value for stockholders.&quot;The company plans to grow visits to its properties &quot;by 15 percent per year over the next several years,&quot; although did not specify how. He also said that Yahoo&#39;s own search marketing system,&#160;Panama, along with two 2007 acquisitions -- Right Media and Blue Lithium -- would &quot;complement and enhance Yahoo!&#39;s existing capabilities and will make it easier for advertisers and online publishers to buy and sell advertising online.&quot;Both Yahoo and Microsoft have struggled to compete with Google&#39;s success in online advertising, specifically its paid search and Adwords programs. Based on the same comScore data, Microsoft captured only 6.7 percent of online display ads. That poor performance is seen as the main impetus behind its move for Yahoo.The letter made no mention of&#160;talks with News Corp.&#160;for some sort of share swap, intended either to offset Microsoft&#39;s interest or force the software company to boost its bid for Yahoo, as reported late Wednesday in The Wall Street Journal.
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Yahoo said Monday that the board of directors, in consultation with financial and legal advisors, has concluded that Microsoft's US$44.6 billion [b] bid for the company is not in its best interests.
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Yahoo&#39;s rejection of Microsoft&#39;s acquisition bid&#160;is likely a negotiating strategy to elicit a higher offer and shouldn&#39;t be seen as an attempt to resist a deal at all costs, according to analysts.Neither Microsoft nor Yahoo has many options to improve their position in online services and advertising, and combining forces is their best bet against common rival Google, analysts said.&quot;It&#39;s part of a larger negotiation that&#39;s occurring. Clearly, Yahoo should be and is seeking a higher bid, and this is part of that process,&quot; said Clayton Moran, a financial analyst with Stanford Group.Yahoo is unlikely to find a company willing to bid as much as Microsoft for it, while Microsoft will not be able to attain its Internet goals by acquiring a company other than Yahoo. &quot;While they need to negotiate and go through the process, at the end of the day this deal will happen,&quot; Moran said.On Monday, Yahoo rejected Microsoft&#39;s bid, saying it undervalues the company. Microsoft offered to pay $31 for half of Yahoo&#39;s outstanding shares and 0.9509 of a Microsoft share for the other half. At the time of the offer, Microsoft&#39;s stock stood at $32.60 and the bid was valued at $44.6 billion, a 62 percent premium over Yahoo&#39;s stock price at the time. However, the bid&#39;s value has dropped with Microsoft&#39;s sliding stock price, which at press time was $28.10. At the same time, Yahoo&#39;s stock price has risen from a close of $19.18 on the day before the bid to $29.75 at press time.Moran predicted that Microsoft will adjust its offer so that it ends up at $35 per share, probably increasing the fixed cash portion and reducing the variable stock portion so that value is less vulnerable to Microsoft stock fluctuations. A $35-per-share offer would be a midpoint between the original bid and the $40 per share Yahoo is reportedly seeking.&quot;We continue to view a Yahoo sale to Microsoft as the most likely outcome,&quot; Citigroup financial analysts wrote in a note published Sunday after press reports over the weekend that Yahoo would reject the Microsoft bid. The rejection isn&#39;t surprising but rather is consistent with Yahoo&#39;s board job to &quot;extract maximum value&quot; for shareholders, the Citigroup analysts wrote.Yahoo has reportedly held talks with Google and AOL to explore alternatives to a Microsoft acquisition. One scenario being floated would be for Yahoo to outsource its search advertising business to Google, while another, reported Monday by The Times of London, has Yahoo and Time Warner&#39;s AOL discussing a possible merger.However, neither option would match the potential benefits of an acquisition by Microsoft, Moran said. &quot;A combined Yahoo-AOL wouldn&#39;t be particularly strong, and Yahoo&#39;s stock wouldn&#39;t react favorably to that deal,&quot; Moran said. A search partnership with Google would boost Yahoo&#39;s revenue, but it wouldn&#39;t address larger problems within the company, he said.For Moran, if Yahoo has approached AOL, it has done so probably to send a message to Microsoft that it has other options and that Microsoft has to sweeten its offer. Meanwhile, Google&#39;s intervention is probably directed at complicating and lengthening the negotiation process between Microsoft and Yahoo and thus delaying the formation of a stronger rival, Moran said.While merging with AOL is unlikely to give Yahoo the boost it needs, such a deal would probably be more palatable to Yahoo&#39;s management because Yahoo would be the strongest party in the fusion, according to industry analyst Greg Sterling of Sterling Market Intelligence.&quot;Yahoo sees its own demise in a Microsoft acquisition. My sense is that Yahoo&#39;s management believes that Yahoo&#39;s soul wouldn&#39;t survive as part of Microsoft,&quot; Sterling said.At this point, the situation is very complicated for both Microsoft and Yahoo. If Yahoo is intent on fending off Microsoft&#39;s advances at all costs, Microsoft could opt to walk away empty-handed and face a public embarrassment, or attempt a hostile takeover, which could alienate and scare away Yahoo employees it would want to retain, Sterling said.At the same time, Yahoo can&#39;t simply wave away a generous Microsoft offer if it doesn&#39;t have an alternative to it, Sterling said. &quot;There is a great deal at stake for both sides, and it&#39;s very complicated,&quot; he said.Microsoft declined to comment about Yahoo&#39;s rejection. AOL didn&#39;t immediately reply to a request for comment about its reported merger talks with Yahoo.
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SEATTLE/NEW YORK  - Yahoo Inc rejected Microsoft  Corp's unsolicited $41.6 billion takeover offer as too low on  Monday, forcing the software maker to either sweeten the bid or  adopt a hostile approach to clinch a deal.
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Yahoo Inc's  board  believes Microsoft Corp's  unsolicited bid of $44.6  billion to acquire Yahoo "massively undervalues" the company  and directors are set to reject the offer, the Wall Street  Journal reported on Saturday, citing an unnamed source.
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A major investor in Yahoo Inc   has met with Microsoft Corp  Chief Executive Steve  Ballmer to see if he would raise a $42 billion unsolicited  offer for the company, the New York Post reported on Friday.
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The Wall Street Journal reports that no serious bids have emerged to rival Microsoft's $44.6 billion offer for Yahoo. That doesn't mean the company isn't still trying to piece something together.
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Microsoft is not privately haggling with Yahoo over the software maker's rejected $31-per-share buyout offer for the slumping Internet pioneer, Bill Gates said in an interview.
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Microsoft CEO Steve Ballmer rebuffed&#160;Google&#39;s accusations&#160;that an acquisition of Yahoo would be anticompetitive.The bid was made public Friday, prompting the response from Google over the weekend. Ballmer Monday at a news conference ceded ground to Microsoft&#39;s arch rival in order to justify his company&#39;s&#160;$44.6 billion cash-and-stock offer for Yahoo,&#160;which if accepted would fall under the scrutiny of U.S. and European regulators.&quot;Google&#39;s clearly got a dominant position,&quot; Ballmer said. &quot;They have about 75 percent of paid search worldwide. We think this enhances competition and anything else would be less good.&quot;A Google executive struck back at Microsoft on Sunday, charging that a combined Microsoft and Yahoo would control an overwhelming share of e-mail and instant-messaging accounts as well as portal traffic.David Drummond, senior vice president of corporate development and chief legal officer at Google, further suggested that if Microsoft buys Yahoo it might try to unfairly use its dominance in those areas, just as it did in the PC market.Monday&#39;s news conference, in which Ballmer spoke with Chief Financial Officer Chris Liddell, appeared to put further pressure on Yahoo&#39;s board to accept the offer, which at $31 a share represents a 62 percent premium over Yahoo&#39;s closing price last Thursday.&quot;We think it&#39;s an extremely competitive offer,&quot; Liddell said.In a Monday filing with the U.S. Securities and Exchange Commission, Yahoo disclosed an e-mail sent on Friday by CEO Jerry Yang and Roy Bostock, non-executive chairman of Yahoo&#39;s board. &quot;First, we want to emphasize that absolutely no decisions have been made and, despite what some people have tried to suggest, there&#39;s certainly no integration process under way,&quot; the e-mail read.Ballmer continued with a hard push as to how a deal with Yahoo will let Microsoft move faster in building out areas such as search, online services and online advertising.&quot;We are going to have to innovate like crazy,&quot; Ballmer said.But he also stressed how long it could take for a Yahoo deal to eventually benefit shareholders. Ballmer said he looks at whether investments will pay off five to 10 years down the line, but investors often want to see results in three years.&quot;Sometimes those investments look smart, sometimes it takes a while for them to pay off,&quot; Ballmer said.
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If Yahooâs board resists the offer, Microsoft would have to pursue a proxy contest.
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BOSTON/SEATTLE  - Yahoo Inc's   second-biggest shareholder urged Microsoft Corp  to  raise its $42 billion bid for the Web pioneer and warned Yahoo  it has few options other than to accept, raising pressure for  them to seal a deal.
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Yahoo Inc  is set to reject  Microsoft Corp's  unsolicited bid, now worth $42  billion, as too low, a source familiar with the situation told  Reuters on Saturday -- the first clear signal the board might  be prepared to negotiate and sell the Internet media giant.