SAN FRANCISCO (AP) - Yahoo Inc.''''s
board will reject Microsoft Corp.''''s
$44.6 billion takeover bid after concluding
the unsolicited offer
undervalues the slumping Internet pioneer, a person familiar with the
situation said Saturday.The decision could provoke a showdown
between two of the world''''s most prominent technology companies with
Internet
search leader Google Inc.
looming in the background. Leery of Microsoft expanding its turf on the
Internet, Google already has offered to help Yahoo avert a takeover and
urged antitrust regulators to take a hard look at the proposed deal.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.Without other suitors on the horizon, Yahoo has had
little choice but to turn a cold shoulder toward Microsoft if the board
hopes to fulfill its responsibility to fetch the highest price possible
for the company, said technology investment banker Ken Marlin."You
would expect Yahoo''''s board to reject Microsoft at first," Marlin said.
"If they didn''''t, they would be accused of malfeasance."But 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.Seizing
on an opportunity to expand its clout on the Internet, Microsoft
dangled a takeover offer that was 62 percent above Yahoo''''s stock price
of just $19.18 when the bid was announced Feb. 1. Yahoo shares ended
the past week at $29.20.Led by company co-founder and board
member Jerry Yang, Yahoo now will be under intense pressure to lay out
a strategy that will prevent its stock price from collapsing again.
What''''s more, Yang and the rest of the management team must convince
Wall Street that they can boost Yahoo''''s market value beyond Microsoft''''s
offer.Yahoo''''s shares traded at $31 as recently as November, but
have eroded steadily amid concerns about the slowing economy and
frustration with the slow pace of a turnaround that Yang promised last
June when he replaced former movie studio mogul Terry Semel as Yahoo''''s
chief executive officer.This isn''''t the first time that Yahoo
has spurned Microsoft. The Redmond, Wash.-based company offered $40 per
share to buy Yahoo a year ago only to be shooed away by Semel,
according to a person familiar with the matter. The person didn''''t want
to be identified because that bid was never made public.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