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Originally published April 7, 2008 at 12:00 AM | Page modified April 7, 2008 at 6:02 PM


Yahoo: Microsoft bid too low, but it's not opposed to better deal

Internet icon Yahoo, under pressure of a three-week deadline from Microsoft to accept its $41 billion buyout bid, said today that it doesn't...

The Associated Press

Internet icon Yahoo, under pressure of a three-week deadline from Microsoft to accept its $41 billion buyout bid, said today that it doesn't oppose a deal with the world's largest software maker but wants a better offer.

The statement comes after Microsoft warned Saturday that if a deal isn't reached by April 26 it will launch a hostile takeover at a less attractive price.

Yahoo shares fell 66 cents, or 2.3 percent, to $27.70 today, while Microsoft's stock closed unchanged at $29.16.

In Yahoo's lengthiest statement about the bid to date, Chief Executive Jerry Yang and Chairman Roy Bostock wrote in a letter to Microsoft CEO Steve Ballmer that the current offer is "not in the best interests of shareholders" of Yahoo.

"We are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders," Yang and Bostock said in the letter. "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders."

Microsoft's offer for Yahoo, made public on Feb. 1, would create a stronger rival to Google, which dominates the online search advertising market.

At the time, the cash-and-stock bid was valued at $44.6 billion, or 62 percent above Yahoo's market value. As of Friday, the deal was worth just under $41 billion.

Yahoo's board formally rejected Microsoft's bid on Feb. 11, saying it undervalues the company.

In today's letter, Yang and Bostock said Microsoft's threat to go hostile is "counterproductive and inconsistent with your stated objective of a friendly transaction."

The Yahoo leaders also dinged Microsoft for implying that the two companies hadn't discussed the deal since February. Yang and Bostock said the two companies "have had constructive conversations together regarding a variety of topics, including integration and regulatory issues.

"Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit," they wrote.

Yang and Bostock also said they are waiting for Microsoft to provide information that would help them understand regulatory issues that could arise from a deal.


Joele Frank, at the public relations firm that Microsoft has hired to advise on the Yahoo deal, said early today that Microsoft had no immediate response to the Yahoo statement beyond the "explicit" letter Ballmer sent to Yahoo's board on Saturday.

"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal," Ballmer wrote.

Since initially rejecting Microsoft's bid, Yahoo has explored alliances with Google, News Corp.'s and Time Warner's AOL, but no alternative to Microsoft's offer has surfaced.

Ballmer acknowledged the alternative negotiations and questioned why, in the absence of another offer, Yahoo was still dragging its heels.

"This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares," Ballmer wrote in the letter. Ballmer said the Microsoft offer has grown stronger as the economic climate has weakened, and that Yahoo's shareholders agreed.

Yang and Bostock rebutted Ballmer's claim that most Yahoo shareholders support a deal, writing, "stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo."

The company recently released a forecast that calls for its revenue to rise more than 70 percent over the next three years. In their letter, Yang and Bostock said Yahoo's business has been marching forward. They pointed to an announcement made earlier today, in which Yahoo released more details about its effort to become a one-stop shop for selling and distributing online display ads — the Internet's equivalent of billboards.

The upgrade, called Amp, won't be available until this summer, and then only on a limited basis among more than 600 newspaper publishers trying to recover some of the revenue that the Internet has siphoned from their print editions.

Yahoo said Amp will make it easier for advertisers to aim their messages at specific demographic groups across scores of Web sites. Amp will rely heavily on data that Yahoo collects about people's preferences at its own Web site as well as other online destinations.

Yahoo's new platform will be competing against similar technology recently acquired by Google and Microsoft. Google bought DoubleClick for $3.2 billion primarily so it would have a better vehicle for selling display ads. The same objective drove Microsoft's $6 billion purchase of aQuantive.

Copyright © 2008 The Seattle Times Company

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