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Microsoft: Yahoo wrong to reject $44.6bn takeover

'Unfortunate' decision fails to combat Google

Microsoft has labelled Yahoo's decision to snub its $44.6bn offer offer for the company as "unfortunate" because time is of the essence to tackle the growing dominance of Google.

Microsoft said the combination of Microsoft and Yahoo would create a more effective force in the marketplaces Google dominates: 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 realise the value inherent in our proposal."

Yahoo said yesterday that Microsoft's "unsolicited proposal substantially undervalues the company".

Analysts have been speculating that Microsoft may raise its offer by $5bn to $12bn. Yahoo is said to be seeking about $40 per share, which would make the offer $56bn.

Microsoft also could push for a hostile takeover in bypassing Yahoo's board and going directly to the stockholders, but that avenue presents risks on many fronts including having to oust the entire 10-person Yahoo board.

Rumours are also circulating that Time Warner division AOL could enter the picture and team up with Yahoo, although that union is not judged to be as strong a competitor to Google.

Google itself has also entered the picture offering to help Yahoo avert a takeover and remain an independent company.

Microsoft believes now is the time for it to accelerate its move into search, advertising and services delivery before Google builds an insurmountable lead. Both Microsoft and Yahoo are playing from behind in the search game against Google, whose US internet search market share increased from 51.7 percent in the fourth quarter of 2006 to 58.4 percent during the same quarter in 2007, according to comScore. In that same period, Yahoo declined from 27.6 percent to 22.9 percent, and Microsoft's from 10.4 percent to 9.8 percent.

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