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Yahoo! Turns Down Microsoft's Offer

For now

By Vlad Constandes, SEO News Editor

11th of February 2008, 11:06 GMT

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What was supposed to be a strong bid to take over the one company that would've given Microsoft the means to take Google head on, turned into an ironic penitence for the Redmond-based company. Not only did Yahoo! tell MS to take a walk around the block to think the

deal over again, but its shareholders punished the software firm like it was a Catholic Priest caught caressing the altar boy, no offense intended.

The blow to MS stock was about the worth of the bid, falling 3.5 billion dollars shot of matching it. Usually, this turn of events would discourage even the bravest acquisition strategist, but when we're talking about Microsoft, nothing is more important than reputation. It already swallowed its pride a year ago when the first Yahoo! bid was made and was rejected, now the important thing to follow is whether MS will flex its muscles and put something on top of the existing offer (some $12 billion, to be exact) and match what analysts thought to be Yahoo!'s shares' real value.

In the meanwhile, the Sunnyvale-based company is playing a dangerous game. If Microsoft backs out and the shares, that rose last week for the first time since October, start going down the slope again, shareholders will most likely sue. The alternative would be that board members put their fortunes at stake to keep the balance.

According to The Wall Street Journal, a person familiar with the situation said that the $44.6 billion bid "massively undervalues" Yahoo!. And to think of all the trouble Steve Ballmer went through, spooning Jerry Yang.

Bottom line, Yahoo! right now has several options, roughly the same as before, but with a twist. It can wait for a higher bid from Microsoft, outsource its search to Google, which will leave it butt-naked in a future renegotiation, or, something that Tech Crunch's Erick Schonfeld wrote, it can out-open its search in an attempt to re-create the Firefox effect. More on this to follow, as the stories unfold.

TAGS:

yahoo news | microsoft | yahoo | bid

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