Yahoo rejects Microsoft's takeover bid

February 12, 2008 11:38:35 AM PST
Sunnyvale based Yahoo turned down Microsoft's near $45 billion buyout offer Monday, but Microsoft isn't giving up. So, what happens next?

Valentine's Day may be only a few days off, but Yahoo is not taking kindly to Microsoft's amorous moves. In rejecting the almost $45 billion dollar offer, chief of Yahoo, Jerry Yang, said the deal "substantially undervalues Yahoo."

Yahoo is citing its global brand, world wide audience, recent investments in improving its advertising platform, and its growth prospects.

Microsoft shot back, saying the rejection was "unfortunate" and that it will pursue "all necessary steps" to convince shareholders it's a good deal.

David Lisi, a Silicon Valley attorney who advises technology companies on mergers and lawsuits, says it sounds like Microsoft could be planning a hostile takeover.

"Microsoft hasn't pulled that trigger yet. They have indicated that they might do that. I'm sure they've got plenty of lawyers working late nights trying to get that strategy in place. I think there's still room for another offer that's communicated," says Lisi.

Yahoo simply could be seeking more money.

"I think everyone in the valley believes that there are a few more dollars that can be put on the table. That would not change the offer that much," says Lisi.

Microsoft is an investor in Yahoo and could be lining up support among other shareholders ahead of the annual meeting later this year.

"It's not today whether you get a checkmate move this early in the game, but who sees the whole board and all the possibilities that best accesses their varying scenarios for how to win at the end of the day," says Terry Connelly, J.D., Golden Gate University Business School Dean.

How long could this drag on? Some say it could be a long time. To the detriment of Yahoo employees concerned about the future of the company, and it poses some risk for Microsoft getting regulatory approval with a change of administration in Washington.