Yahoo Board Reportedly Spurns Microsoft Bid

Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, according to a person familiar with the situation. The decision could provoke a showdown between two of the world's most prominent technology companies. If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer—originally valued at $31 per share—directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.

Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock. Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to The Associated Press. The person didn't want to be identified because the reasons for Yahoo's rebuff won't be officially spelled out until Monday morning.

Microsoft and Yahoo declined to comment Saturday on the decision, first reported by The Wall Street Journal on its Web site. Yahoo's board concluded Microsoft's offer is inadequate even though the company couldn't find any other potential bidders willing to offer a higher price. By spurning Microsoft, Yahoo risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits. The downturn caused Yahoo's stock price to plummet by more than 40 percent, erasing about $20 billion in shareholder wealth, in the three months leading up to Microsoft's bid.

Yahoo now may want that Microsoft to raise its price to at least $40 per share again. That would force Microsoft to raise its current offer by about $12 billion—a high price that might alarm its own shareholders. Microsoft's stock price already has slid 12 percent since the company announced its Yahoo bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.

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