Yahoo Board Balks At Microsoft Bid

Yahoo is set to reject Microsoft'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.


The Wall Street Journal had quoted an unnamed source as saying
Microsoft's offer of $31 per share was an attempt to "steal" the
company and that Yahoo was unlikely to consider anything under $40 per
share -- double its price in January.


At $40 per share, the value of the cash and stock deal would be worth $51.1 billion.


If completed, a merger of Microsoft and Yahoo would be the world's
largest of two computer technology companies and create a formidable
rival to Internet search and advertising leader Google Inc.


Yahoo has been considering options, including negotiating a higher
price and striking a deal with Google to take over its search
operations to keep Yahoo independent, the Journal said. The newspaper
reported Yahoo's board met on Friday.


No alternate bidder has emerged and Wall Street has been betting that
the likeliest outcome was for Yahoo board's to negotiate for a higher
price from Microsoft.No alternate bidder has emerged and Wall Street
has been betting that the likeliest outcome was for Yahoo board's to
negotiate for a higher price from Microsoft.

"Are they really seriously about nothing less than $40 or is it a
negotiating tactic to try to get a richer price?" Global Crown Capital
analyst Martin Pyykkonen said.


"To me it sounds like a counter-negotiation tactic. Maybe they end up settling for $35, $36 or $37 a share."


Last Monday, Citigroup analysts spelled out various scenarios,
including having Yahoo seek a higher bid, find another bidder, see the
deal derailed by regulators or strike a partnership with Google.


The Wall Street firm predicted a higher bid was the most likely option
but that a price of $40 per share "would seem very aggressive" because
Microsoft would have a hard time justifying it against Yahoo's
anticipated cash flows.


For that reason, Citigroup said paying $30 to $31 per share for Yahoo was "reasonable."