Yahoo rejects Microsoft deadline as tech battle intensifies
SAN FRANCISCO – (UPDATE) Yahoo on Monday rejected a three-week deadline from Microsoft to accept a $44.6-billion takeover, as the battle between the two technology titans heated up.
Yahoo however said it was open to a sweetened bid from the software giant or another bidder.
“We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders,” Yahoo’s board chairman Roy Bostock and chief executive Jerry Yang said in a letter to CEO of Microsoft Corporation Steve Ballmer.
“We are open to all alternatives that maximize stockholder value. To be clear, this includes a transaction with Microsoft if it represents a price that fully recognizes the value of Yahoo on a standalone basis,” the Yahoo letter said.
The letter came in response to an ultimatum issued by Microsoft on Saturday for the Internet giant to accept its $44.6-billion takeover offer in three weeks or face a shareholder proxy fight.
Analysts said the battle of the technology giants appeared to be intensifying.
“These dueling quasi-legal missives may not reflect what’s going on actually behind the scenes with the two companies but it appears to show increasing entrenchment and inflexibility on the surface,” said Greg Sterling, analyst at Search Engine Land.
Henry Blodget, an analyst with Silicon Valley Insider, said: “It is imperative to read between the lines. More important than what Yahoo said in its Microsoft response this morning was what it did not say.”
Blodget said the wording “suggests that Yahoo’s institutional shareholders may support Microsoft, not Yahoo.”
In an open letter to the Yahoo board of directors released over the weekend, Microsoft’s Ballmer accused the company of avoiding serious negotiations over its unsolicited February 1 bid and warned that any further delays could result in a less attractive offer for Yahoo.
“We believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement,” Ballmer said in the letter, which was posted on the Redmond, Washington-based company’s website.
“If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board.”
Microsoft is betting that by combining with Yahoo, it can gain ground on Google’s overwhelming dominance of the lucrative Internet advertising sector.
Yahoo has steadily lost market share in online advertising, leaving it vulnerable to cash-rich Microsoft’s takeover effort.
On March 18 Yahoo said the company was worth at least $40 share, compared with Microsoft’s original offer of $31 a share. The higher figure would add some $10 billion to the cost of the deal to the buyer.
But Ballmer said in his letter Saturday that the US economic slump and sagging stock market, if anything, had hurt Yahoo’s value.
In addition, he said, “public indicators suggest that Yahoo’s search and page view shares have declined.”
“By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment,” he said.
“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,” the letter said.
Shares in Microsoft fell 0.03 percent to close at $29.16, while Yahoo tumbled 2.4 percent to $27.68.