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Feb. 11, 2008

Earlier today, Yahoo has confirmed it is rejecting the $45 billion unsolicited buyout bid from Microsoft. Yahoo said it has rejected the offer since it wasn't in the best interest of its shareholders.

"Yahoo's management board strongly believes that Microsoft's buyout offer substantially undervalues Yahoo, including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects."

"It also negatively reduces our free cash flow and earnings potential, as well as our substantial unconsolidated investments," said the official company statement.

On Feb. 2, Microsoft offered $31 a share for Yahoo, in a cash and stock bid that analysts said represented a 62 percent premium from the previous day closing price for Yahoo' stock.

The proposed merger of Microsoft and Yahoo would create a powerful No. 2 player in the online search business, which Google currently controls by a very wide margin.

Yahoo also added that it would evaluate all other strategic options and that it remains committed to improving value for all its shareholders and partners.

However, Yahoo's rejection to the offer wasn't a surprise to many, and had been expected by investors since Feb. 7.

Some industry observers believe this is part of an effort by Yahoo to get a higher sales price from Microsoft. While the offer represented a large premium from the recent pre-offer price, it only represented the price level seen for Yahoo stock in November 2007.

And since the global stock market has fallen to a much lower point today than where it was in November, Yahoo's decision to reject Microsoft's offer appears to be validated.

On. Feb. 6, News Corp. Chairman Rupert Murdoch, who has been buying online properties for his media conglomerate, said his company would not bid for Yahoo. Time Warner, which held talks in the past about combining its AOL unit with Yahoo, appeared with its own announcement last week to be moving to shed part of its AOL operations, not add to it.

For its part, Microsoft didn't have any immediate response to the statement. Yahoo's stock gained over 2 percent in pre-market trading immediately after the announcement, while shares of Microsoft increased about 0.3 percent.

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Source: Yahoo.