Last Updated on Tuesday, 19 February 2008 11:56 Sunday, 10 February 2008 21:52

After a week of reviewing Microsoft's proposal, the Yahoo! board of directors plans to reject the offer. They declined the buyout because the offer was not enough. The Wall Street Journal reported that sources involved say the offer needed to be 40USD per share. That price would garner an extra 12 billion dollars and would bring the price to 53.6 billion USD. Due to Microsoft's stock dropping recently, the original offer is only worth 41 Billion USD.

Analyst think Microsoft will have to bid 34-37USD in a compromise with Yahoo!. Microsoft has bargaining power due to the lack of options available to the ailing company. Yahoo! is considering outsourcing their search operations to Google, which would alleviate search engine costs. On the other side, the regulatory issues involved would be intense. The company is also reconsidering a deal with Time Warner's AOL Internet unit.

Despite Yahoo!'s bravado, Microsoft still has enough might to influence shareholders into stressing the deal. Something that CEO Steve Ballmer specifically mentioned in their letter:

"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"

Yahoo! is betting they will not attempt a hostile takeover. Publicly, Microsoft does not want to alienate Yahoo!'s workforce, which are essential to operations.

Estimates peg the annual cost savings between the two companies at 1 - 1.5 Billion USD. Microsoft is likely to go to great lengths and funding to acquirer Yahoo!. Only time will tell the conclusion. We will keep an eye out for Microsoft's hostile takeover **new bid.

The Wall Street Journal has an in-depth article as well as Bloomberg.

**update**

Microsoft is using their might to oust the Yahoo! board of directors. They have decided to kick it up a notch and try to takeover Yahoo! in a hostile manner.

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