On February 11, 2008, Yahoo's Board of Directors formally rejected the $44.6 billion unsolicited acquisition proposal from Microsoft, in a move that kept in line with almost two years of consequent negative answers. After some 18 months of failed private negotiations, the Redmond company went public with an aggressive move, interpreted by Google as a hostile takeover bid, and offering $44.6 billion in an effort to force Yahoo's Board of Directors to at least consider the deal. At the same time, Microsoft Chief Executive Officer Steve Ballmer signaled from the get-go that another "no" will only superficially influence the course of the acquisition.

"After a careful evaluation, the board has unanimously concluded that the proposal is not in the best interests of Yahoo! and our stockholders. Of course, the board of directors is continuously evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for stockholders. We believe Microsoft's proposal substantially undervalues Yahoo!-including our highly recognizable global brand, large worldwide audience, significant recent investments in advertising platforms, future growth prospects, our ability to generate free cash flow and our earnings potential as well as substantial unconsolidated investments," revealed Yahoo CEO, Jerry Yang.

Microsoft almost immediately came out with an answer to Yahoo's response, and reiterated its full and fair proposal for the marriage of the two companies. At this point in time, the Redmond company has not indicated that it is in any way ready to raise the bid. Yahoo was reportedly looking for no less than $40 per share, or approximately $57 billion. Even with the initial offer of $44.6 billion, payable half in cash and half in stock, Microsoft would have to go into debt in order to get its hands on Yahoo, it is hard to believe that it would accept to pay another $12 billion.

"It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties. We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," reads an excerpt of Microsoft's statement.

But one thing is clear. Even if Yahoo has closed the door on Microsoft, it has kept the windows open. And this is a clear indication that further negotiation is welcomed. But at the same time, the Sunnyvale Internet giant could swing to a different partnership, the most relevant of which, and one that would hurt Microsoft, would be to outsource its search/ad platforms to Google. On the other hand, Microsoft plus Yahoo, even if both failing on the online and advertising markets compared to Google, would create a worthy opponent for the Mountain View-based search giant.

"A Microsoft-Yahoo! combination will create a more effective company that would provide greater value and service to our customers. Furthermore, the combination will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising. The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal," Microsoft added.