Yahoo Says 'Not So Fast' to Microsoft

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Published reports this weekend say Yahoo has sent a letter to Microsoft rejecting a bid by the giant software maker to buy the search-engine company. But the letter could just be a negotiating ploy.


Yahoo has an alert for Microsoft: not so fast. Published reports this weekend says Yahoo will reject Microsoft's $44.6 billion bid to buy the Internet search company, saying the offer is too low.

NPR's Kathy Lohr reports that Yahoo's board of directors is set to send its response to Microsoft in a letter on Monday.

KATHY LOHR: The letter going to the largest software maker is expected to say that Microsoft's offer of $31 per share massively undervalues Yahoo. Yahoo's board says it's unlikely to consider any offer below $40 per share. A source told the Wall Street Journal that the board believes Microsoft is trying to steal the company at a time when Yahoo's stock prices have been falling.

Some suggest this is a negotiating tactic and may not be a signal that Yahoo isn't really interested in a partnership in the long run. Rob Enderley(ph) is a technology analyst.

Mr. ROB ENDERLEY (Technology Analyst): Any board will not take the first offer. They need to be able to demonstrate that they got the best offer that they could get. And so it is not atypical to reject the first offer and have Microsoft come back.

LOHR: It's unclear how much higher Microsoft's offer might go. Enderley says the negotiations may take a while because regulatory issues come into question.

Mr. ENDERLEY: The Department of Justice is looking at this as well as the European Union, and they've been incredibly aggressive, particularly with regard to Microsoft over the last couple of years. So they could throw a fairly good-sized monkey wrench in this thing.

LOHR: The deal would be one of the biggest mergers in years. It has interested analysts because both Yahoo and Microsoft have fallen far behind Google in capturing the Internet search engine business. Chris Tolls is the CEO of Topic, a local online news site.

Mr. CHRIS TOLLS (CEO, Topic): I think it's atrocious that no one's been able to compete with Google. Google has done such a great job of becoming the start page of the Internet and drive so much traffic to so many people that they just have this overwhelming competitive edge over everyone else.

LOHR: Tolls says it's difficult to forecast whether the merger of Microsoft and Yahoo would be an obvious success. But he says neither should give up trying. If this deal fails it would just give a bigger edge to Google, which has already offered to step in and help Yahoo fend off Microsoft's bid.

Kathy Lohr, NPR News.

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Microsoft Makes $44.6 Billion Offer to Buy Yahoo

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Q&A: Microsoft's Bid

What do Microsoft and Yahoo stand to gain from the deal, which would be Microsoft's largest ever? Read a Q&A

Microsoft Corp. on Friday announced it has made an unsolicited bid to buy Yahoo Inc. for $44.6 billion. Yahoo, which has seen its profits and share price slide in recent months, said it would consider the offer.

In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer indicated the world's largest software maker is determined to bring the two companies together.

The move is seen as a direct challenge to Google Inc., whose dominant Internet search engine has catapulted the firm to the top rung of technology companies. Google's share price plunged in early trading Friday on news that it would fall short of its earnings forecast, as well as the Microsoft-Yahoo deal.

Microsoft made a similar offer last year that was rebuffed by then Yahoo CEO Terry Semel, who later stepped aside under pressure from shareholders.

"A year has gone by, and the competitive situation has not improved," Ballmer added.

Yahoo confirmed the surprise offer of $31 per share, made late Thursday and announced Friday. It comes as the Sunnyvale, Calif.-based Internet icon's stock slipped to a four-year low earlier this week and new management was put in place to try to steer a turnaround.

Yahoo said its board would evaluate the proposal "carefully and promptly in the context of Yahoo's strategic plans and pursue the best course of action to maximize long-term value for shareholders."

Microsoft said it sees at least $1 billion in cost savings generated by the combination, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees.

The software giant said it believes the takeover would receive regulatory clearance, and that the deal would close in the second half of 2008. However, the Justice Department said Friday that it is reviewing possible antitrust issues and the competitive effects the deal might have.



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