Yahoo rejects offer as undervalued; Microsoft renews bid
Updated: 2008-02-12 09:06
Analysts at RBC Capital Markets said the rejection of the Microsoft bid signals that there is no sign of interest from competing bidders and that negotiations have entered a "counteroffer stage."
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Microsoft says it is prepared to tap into financial markets and leverage a buyout for the first time since it was founded in 1975.
Microsoft believes a combination of the companies would lead to cost savings of a billion dollars per year.
But Yahoo chief executive Jerry Yang sent a message to employees last week, assuring them the firm's leaders were exploring ways to avoid a Microsoft takeover.
"Our board is thoughtfully evaluating a wide range of potential strategic alternatives in what is a complex and evolving landscape," Yang wrote in the email.
Google meanwhile has condemned Microsoft's effort as an attack on "the underlying principles of the Internet: openness and innovation."
Analysts say the goal of the takeover is to better compete with Google, whose dominance of Internet advertising, backed by its powerful search engine technology, has come at the expense of Microsoft and Yahoo.
Microsoft, they say, hopes that by taking over Yahoo it will expand its own presence in online advertising and, using Yahoo's popularity and technology, ratchet up its competitiveness in Internet services.
Reports surfaced Monday that options being considerd by Yahoo include merging with faded Internet star America Online (AOL), now owned by Time Warner.
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