Yahoo demands to be valued Higher

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Microsoft’s threat might have helped disturb Yahoo but it did not serve the purpose for the software giant. Yahoo retorted by saying that Microsoft Corp.'s $42.25 billion takeover bid "substantially undervalues" the company, but they remain open to a deal with the software giant if it "is superior to our other alternatives."

Although Microsoft’s offer was initially valued at $31 a share, a drop in the price of shares brought it down to just more than $29 a share.

Microsoft’s chief executive, Steven A. Ballmer, tried to pressurize Yahoo directors on Saturday in a letter warning that a proxy fight would be initiated if the two companies did not reach a negotiated deal in the next three weeks.

“Our board’s view of your proposal has not changed,” Yahoo said in a statement. “We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders.”

“Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo. Furthermore, as a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal,” wrote CEO Jerry Yang and Chairman Roy Bostock.

In its response letter Yahoo stressed that Microsoft or any other company would not be able to get hold of Yahoo for a price, which is below its worth.

The Sunnyvale, California-based Yahoo called Microsoft's threat ‘counterproductive’ and is still evaluating alternatives to the bid, which was 62 percent higher than its stock price at the time of the offer.

Microsoft, for its part has maintained that it sees no reason to raise the bid, because Yahoo, which has discussed alternative deals with other companies, does not have any competing offers.

Yahoo dropped 66 cents to $27.70 in early trading after closing at $28.36 on the Nasdaq Stock Market on April 4.

Shares of Microsoft have also fallen since the bid, closing last week at $29.16.