Will Microsoft take the bait?
Having spent a mum week mulling Microsoft's unsolicited $44.6 billion takeover bid, Yahoo has opted to decline, according to a company insider.
$44.6 billion values Yahoo at $31 per share. Since the bid was announced, Yahoo's stock price leaped from under $20 to $29.20 as of market close on Friday.
Yahoo thought the price would not alleviate risks associated with entering an agreement that regulators might overturn. Ultimately, the board ruled that the offer "massively undervalues" the company.
According to the source, Yahoo thinks Microsoft is trying to "steal" the company at a discount rate. Furthermore, it will not entertain offers to sell for less than $40 per share — a $12 billion increase on the original offer.
Microsoft can expect a rejection letter from the board on Monday, the Wall Street Journal reports.
Shortly after Microsoft announced its offer to buy Yahoo, Google published a blog urging regulators and consumers to examine the market before letting the deal pass. It pointed to Microsoft's anticompetitive practices in the enterprise software industry, alluding Microsoft would try to monopolize the internet.
In response, Microsoft drew attention to Google's share of the search market, which is more than double that of MSN and Yahoo combined.
Early last week, CEO Eric Schmidt of Google reached out to Yahoo's Jerry Yang to provide assistance in the decision-making process. Google's reported motivation was either to help Yahoo go private — in which case Yahoo's search may be outsourced to Google — or stimulate a bid increase from Microsoft.
The firm, which hopes to swell its girth in web advertising, may have difficulty resisting the urge to call Yahoo's bluff. Some believe Microsoft agreed to pay an exorbitant amount for a mere 1.6 percent of Facebook, goaded on by instigating bids from Google and Yahoo.
It is unlikely Microsoft will attempt to acquire Yahoo against the will of its board. But whether it agrees to tack $12 billion to its offer price remains to be seen.