Yahoo Rejects Microsoft's Offer

Portal Could Explore Alliances With Google, AOL

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NEW YORK ( -- Following Yahoo's decision to reject Microsoft's $44.6 billion takeover attempt, speculation has focused on what the future holds for the slumping online-media giant.

A few scenarios have popped up. One has Microsoft continuing to press Yahoo by taking the proposal directly to its shareholders or by sweetening the offer to make it palatable to the Yahoo board, which today said the bid undervalues the company. Another has Yahoo playing defense either by partnering with Google on search advertising, sure to draw scrutiny from regulators, or by rekindling talks with Time Warner about a merger with its AOL unit.

Microsoft is chasing Yahoo as part of its effort to close the gap on Google, the leader in search. The combination would combine the No. 2 and 3 players, but "Micro-hoo," as it's been unofficially dubbed, would still trail Google.

Bid 'substantially undervalues Yahoo'
A statement from Yahoo's board of directors today said the bid "substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments."

In its statement, the Yahoo board said it is "continually evaluating all of its strategic options in the context of the rapidly evolving industry environment, and we remain committed to pursuing initiatives that maximize value for all stockholders."

A Microsoft spokesman declined to comment.
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