Yahoo rejects $44.6 billion bid from Microsoft

Yahoo’s 10-member board has rejected Microsoft’s $44.6 billion merger with the search engine giant. The official announcement will be made Monday when a draft letter will be delivered to Microsoft.

Microsoft could still make another offer to sweeten the deal, but Yahoo executives made it clear that the international company wants to remain independent and without a corporate merger.

There was speculation that Yahoo might be concerned with regulators blocking the Microsoft-Yahoo merger due to the large market share very much involved with both companies.

An inside reliable source said that Yahoo might also be holding out for $40 per share, instead of the $31 per share which Microsoft offered. $40 per share would increase the overall value of the Yahoo proposal by $12 billion, totaling $58 billion.

Sandeep Aggarwal, an analyst with Oppenheimer & Co., said he believe’s the rejection was for the current price of the offer, not a rejection of Microsoft.

Microsoft wants Yahoo to increase its online advertising business and create more competition with Google.

Microsoft must now decide whether to raise its initial bid in hopes of swaying Yahoo’s board. In any case, analysts had predicted that the Redmond, Wash., software titan would have to sweeten its proposal to $34 to $40 per share to get Yahoo’s board to sign off on the deal.

However, Daniel Taylor, an analyst with Yankee Group, is skeptical that Yahoo wants to merge and takes the board’s pending rejection of the deal as the end of negotiations, not the beginning. Yahoo’s board members, he said, have determined that the two companies are incompatible and that Yahoo would be better off merging with a more traditional media company.

Another possibility is Google. Yahoo is still considering the move of outsourcing the company’s search advertising business to Google. Although considered an uncertain outcome, the move could increase Yahoo’s profits by allowing it to shed advertising and technical staff.