Waiting on MS in Yahoo deal

Johannesburg, 29 Apr 2008

All eyes are on Microsoft, as the deadline it set for negotiations with Yahoo comes to an end.

Reports on Friday saw Microsoft readying to take action, either by cutting its bid of $31 a share - with a current value of $44 billion - or to make a hostile move by taking the bid directly to shareholders.

The Yahoo board publicly rejected Microsoft's offer in January. Yahoo chairman Roy Bostock and CEO Jerry Yang said Microsoft's offer did not meet the actual value of the company.

The pair said in a public letter to Microsoft at the beginning of the month: "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.

"Since disclosing our board's position with respect to your proposal, we have presented our three-year financial and strategic plan to our stockholders, which supports our board's determination that your unsolicited proposal substantially undervalues Yahoo. Those meetings with our stockholders have also provided us an opportunity to hear their views."

Microsoft in turn gave the company three weeks to come to the negotiating table or face the possibility of a hostile takeover.

It remains to be seen whether Microsoft will follow through on this threat. However, on Friday, Microsoft CEO Steve Ballmer warned this proxy contest would be aimed at electing an alternative slate of directors for Yahoo.

Bostock and Yang scorned the idea in its public letter, saying: "We consider your threat to commence an unsolicited offer and proxy contest to displace our independent board members to be counterproductive and inconsistent with your stated objective of a friendly transaction. We are confident that our stockholders understand that our independent board is best positioned to objectively and knowledgeably evaluate our company's alternatives and to maximise value."

According to Yang, Yahoo remains open to doing a deal with Microsoft; however, it continues to explore alternative deals. "Our board and management team continue to be open to any and all alternatives, including a Microsoft deal," he told investors during a conference call.

Despite better than expected results by Yahoo in its first quarter earnings reported last week, Microsoft has remained adamant it will not review its offer. International analysts say a proxy battle is increasingly likely.