Microsoft Re-Opens Negotiations With Yahoo!

Microsoft has re-entered talks with Yahoo! about a limited merger just weeks after its takeover bid collapsed as both companies failed to find common ground.

Yahoo! turned down Microsoft’s $33-a-share deal, saying it undervalues the company, which they believe is worth $37 a share (see NewsLine).

The compromise comes as billionaire investor Carl Icahn – whose fund has spent more than $1 billion on a 4% stake in Yahoo! – puts pressure on the board to complete a sale to Microsoft.

Microsoft said in a statement: “In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo!, Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business.”

It added: “Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!.”

Reports suggest the deal may involve a combination of the two companies online advertising businesses, which could potentially rival the industry leader, Google.

Google previously criticised Microsoft’s $44.6 billion takeover bid of Yahoo!, suggesting the combination of the two companies could take advantage of a PC software monopoly (see Google Raises Competition Questions Over Microsoft/Yahoo! Deal).

Google recently announced a profit after tax of $1.3 billion (£655 million) in the first quarter of 2008 (see Google Reports First Quarter Growth) but it looks as though Microsoft’s revived interest will quash any plans of its own partnership with Yahoo!.

Microsoft: 0870 60 10 100 www.microsoft.com Yahoo!: 020 7808 4200 www.yahoo.co.uk