Microsoft directors consider increasing bid for Yahoo

Associated Press

May 1, 2008

SAN FRANCISCO - Microsoft Corp.'s directors met yesterday to consider raising the software maker's $41.9 billion bid for Yahoo Inc. instead of pursuing a hostile takeover attempt, according to a published report.

The board emerged from the meeting without reaching a decision, The Wall Street Journal reported, citing unnamed people familiar with the matter.

The boardroom intrigue heightens the suspense hanging over Microsoft's bid since Yahoo let pass a Saturday deadline for accepting the offer. Microsoft has indicated it will reveal its response to Yahoo's latest snub before the end of the week.

Microsoft Chief Executive Officer Steve Ballmer had threatened to oust Yahoo's 10-member board - including Yahoo co-founder and CEO Jerry Yang - if it didn't relent and agree to a sale.

But Ballmer apparently is having second thoughts about attempting a coup, which likely would involve several months of animosity and distraction, with no assurance of victory.

Contradicting Ballmer's recent public statements, Microsoft privately has indicated it might be willing to boost its offer to as much as $33 per share, up from the bid's initial value of $31 per share, the Journal reported yesterday.

Microsoft also is weighing withdrawing its bid - a move likely to cause a precipitous drop in Yahoo's stock, which has been bolstered by the 3-month-old takeover bid. Yahoo shares gained 5 cents yesterday to finish at $27.41. Before Microsoft announced its unsolicited bid in February, Yahoo's stock price stood at $19.18, near its four-year low.

If Yahoo's stock deteriorated during the next few months, Microsoft could return with another bid that would be more difficult to turn down.

Microsoft had not responded to requests for comment as of late yesterday.