Microsoft, Yahoo aren't talking as investors await next move

April 28, 2008 6:52:41 PM PDT
The top executives at Microsoft Corp. and Yahoo Inc. haven't held any recent discussions to break an impasse that threatens to turn Microsoft's 3-month-old takeover bid into a slugfest.

Not even a key weekend deadline brought the two sides together, according to Brad Smith, software maker Microsoft's general counsel.

Responding to a question Monday from The Associated Press, Smith said no meetings have been scheduled among executives at Microsoft and Internet pioneer Yahoo.

The lack of communication is the latest sign of a chasm that has developed since Microsoft Chief Executive Steve Ballmer lashed out at Yahoo's board in an April 5 letter.

In that missive, Ballmer set an April 26 deadline for accepting his company's cash-and-stock offer, which was worth $42.2 billion, or $29.31 per share, in late afternoon trading Monday.

Yahoo let the Saturday deadline lapse without elaborating on its board's unanimous opinion that the Sunnyvale-based company's slumping Internet franchise is worth more.

Microsoft is expected to disclose its response to Yahoo's defiance this week. Smith declined to comment Monday on Microsoft's next measures.

Most analysts believe Microsoft wants Yahoo badly enough to attempt a hostile takeover, a risky process that would probably include a mudslinging campaign to replace Yahoo's 10 directors with board members more receptive to a deal.

The outcome of the so-called proxy contest probably wouldn't be settled until Yahoo's annual meeting, which might not be held until July.

Both Ballmer and Microsoft's Chief Financial Officer, Chris Liddell, publicly suggested last week that the Redmond, Wash.-based software maker might retract its offer ? a move that would likely cause Yahoo's stock to plummet.

Taking the bid off the table for now could pave the way for a friendly deal in a few months if Yahoo Chief Executive Jerry Yang's turnaround efforts don't pan out.

Should Yahoo's lackluster results of the past two years continue during the current quarter, which ends in June, its stock likely will sink even lower and open the door for Microsoft to return with another offer more likely to be embraced.

Microsoft also could still sweeten its offer, although Ballmer and Liddell said last week that the company won't up the ante.

Indicating investors aren't expecting a higher bid, Yahoo shares were unchanged at $26.80 in Monday's late afternoon trading while Microsoft shares shed 79 cents to $29.04.

In an even more remote possibility, Microsoft could set another negotiating deadline in hopes that its executives might be able to reopen talks with their Yahoo counterparts.

As of early April, Ballmer had participated in at least two meetings with Yahoo, according to a letter that Yang sent to Microsoft to reiterate the company's demand for a higher offer.

In that April 7 letter, Yang described Ballmer's threat of a proxy contest as "counterproductive."

Just two days later, Yahoo announced it was exploring an Internet advertising partnership with Google Inc., whose dominance of the online search market was the main trigger for Microsoft's bid.


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