Microsoft, Yahoo discussing deal
The two sides met quietly. It may be the first step toward a friendly merger of the companies.
SAN FRANCISCO - Microsoft Corp. met with Yahoo Inc. this week to discuss the software-maker's unsolicited takeover bid, a breakthrough that could be the first step toward a friendly deal between the two rivals.
The meeting occurred Monday near Yahoo's Sunnyvale, Calif., headquarters, according to a person familiar with the situation. The person spoke yesterday on the condition of not being identified because the preliminary talks have not been formally disclosed.
No investment bankers attended Monday's meeting, nor was there any discussion about whether Microsoft is willing to raise its offer, initially valued at $44.6 billion, or $31 per share. Yahoo's board already has rejected that bid, arguing the company's Internet franchise is worth more.
Although it's unclear whether Microsoft chief executive Steve Ballmer and his Yahoo counterpart, Jerry Yang, attended Monday's meeting, senior management from both companies was on hand.
The gathering, first reported by the Wall Street Journal, gave Microsoft its first chance to sell Yahoo on the rationale for the proposed marriage since the software-maker revealed its plans six weeks ago.
Since then, Yang has been exploring different ways to ward off Microsoft. The alternatives have included possible alliances with Internet search and advertising leader Google Inc., News Corp.'s MySpace.com, and Time Warner Inc.'s America Online.
Microsoft has held firm with its bid and warned that it was prepared to pursue a hostile takeover if Yahoo continued to resist.
Most industry analysts believe neither side wants to engage in an acrimonious battle and expect Microsoft to resolve the impasse with a slightly higher bid.
Investors aren't so sure the stakes will be raised. Yahoo shares fell 79 cents to $26.71 yesterday while Microsoft shares shed 66 cents to $27.96. At that price, Microsoft's offer - made partly in Microsoft stock - is worth about $40 billion.
The saga could still take several weeks to play out and may not be resolved until Yahoo releases its first-quarter earnings April 22. With Yahoo mired in a two-year slump, the first-quarter results could sway Microsoft's next move.
The waiting game works in Google's favor by distracting two of its biggest rivals while it strives to extend its dominance of the Internet's lucrative search and advertising markets. Google added another layer of muscle this week by completing its $3.24 billion acquisition of online-ad service DoubleClick Inc.
Microsoft believes a combination with Yahoo will pose a more serious threat to Google.