Yahoo Board Set to Turn Down Microsoft Offer

The latest news on the Microsoft bid for Yahoo is that, Yahoo is all set to turn down the offer through a formal notification on Monday. Sources familiar with the situation said that, the board of directors at Yahoo had decided the $44.6 billion being offered was too low to consider.

Giving reasons for turning down the offer, Yahoo would be stating in its official notification that the $31 per share that Microsoft was offering did not give the correct picture of the actual value of the company, as it seemed to be based on a recent slide in the company’s stock value. Besides, the amount offered would not be enough to cover the risk arising out of the possibility of regulators rejecting the merger.

Yesterday, the board of directors of Yahoo gathered to examine ways of responding to the acquisition offer put forward by Microsoft. Possible responses that the board looked at included the possibility of sidestepping Microsoft’s offer. A media report has suggested this would be possible if the company were to outsource to Google itself it’s search-advertising business.

Citing sources that it did not name, a report carried in the Wall Street Journal’s online edition said board members of Yahoo discussed over telephone strategies that could coax Microsoft into increasing its bid amount. The report went on to say the board members would be meeting again soon to continue discussion regarding the options available to the company.

For Yahoo, outsourcing its search-advertising business to Google would be a sure way of sidestepping Microsoft’s offer. Should the company agree to do so, it would mean allowing Google to post the advertisements on its search pages. The trade-off would be a slice of the revenue generated as a result of such an exercise.

This kind of an arrangement seems to find favor with analysts who cover Yahoo at Wall Street. However, whether outsourcing to Google remains the best possible option for Yahoo is a matter of speculation, especially considering such a move could bring into the picture antitrust scrutiny and also impact the company’s value in the long run.

Microsoft would definitely not let the situation pass. As it is, company officials have been talking to regulators of the government about the possible antitrust issues that such a move, i.e. a linking up of Yahoo and Google could throw up. The argument from Microsoft is that allowing Yahoo to outsource its search-advertising to Google would be tantamount to Google paying Yahoo to ensure it is no longer competition for Google.

Last Friday, Microsoft launched a bid for Yahoo, a rival player in the online services arena. The offer, an unsolicited one, was worth $44.6 billion. At that time, Yahoo had not committed any response to the bid, saying merely that it would look at all available ‘strategic alternatives’ over time.