Yahoo Plans to Reject Microsoft's $44.6 Billion Bid, WSJ Says

Yahoo Plans to Reject Microsoft's $44.6 Billion Bid, WSJ Says

Feb. 9 (Bloomberg) -- Yahoo! Inc., the world's second most popular Web search engine, plans to reject a $44.6 billion unsolicited takeover offer from Microsoft Corp., the Wall Street Journal reported, citing an unidentified person familiar with the situation.

The board decided the price ``massively undervalues'' the Sunnyvale, California-based company and Yahoo may face risks because regulators could oppose the combination, the newspaper said today. On Feb. 1, Microsoft offered $31 a share in cash or stock for Yahoo, 62 percent more than the closing price the day before the bid.

Chief Executive Officer Jerry Yang said this week that Yahoo is examining many options to revive its stock price. Yahoo's failure to crack Google Inc.'s dominance in search led to eight straight profit declines and cut the value of the stock by half in the two years before the offer.

``Yahoo still has one of the largest brands on the Internet,'' Bill Tancer, general manager at researcher Hitwise Pty. Ltd. in San Francisco, said in an interview Feb. 5. ``It confines Google to continue to grow their revenue from a single revenue stream, which is search.''

The board will send a letter to Microsoft on Monday that outlines its position, the Journal said.

Yahoo rose 16 cents to $29.20 yesterday in Nasdaq Stock Market trading. Microsoft, based in Redmond, Washington, added 44 cents to $28.56.

Google Partnership?

Yahoo might seek help from rivals, soliciting other bids or seeking partnerships with Rupert Murdoch's News Corp. or Google to thwart Microsoft, according to analysts including Stanford Group Co.'s Clayton Moran. Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. are advising Yahoo on Microsoft's offer.

The New York Times reported Feb. 4 that Google CEO Eric Schmidt contacted Yang to suggest a partnership between their companies. Yang, 39, replaced Terry Semel as chief in June after Yahoo's share of Web searches tumbled and the company lost sales of banner ads.

Google has grown faster than Microsoft in every quarter since Google's 2004 initial public offering as its search engine won more users. Even after CEO Steve Ballmer's efforts to build a new search engine from scratch, Google outsold Microsoft in Internet ads by 7-to-1 in Microsoft's latest fiscal year.

Even combined, Microsoft and Yahoo would fail to seize the lead in Internet search. Google, based in Mountain View, California, got 56 percent of U.S. Web queries in December, which is almost double Yahoo and Microsoft's shares together, according to New York-based Nielsen Online.

Yang founded Yahoo with David Filo while the two were graduate students at Stanford University in 1995. They took the company public a year later. After a three-year jump in the stock price, they were each worth $4 billion, according to Forbes magazine. Then the market crashed in 2000, wiping out 86 percent of Yahoo's value.

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