Update: Microsoft threatens Yahoo with proxy fight
Says Yahoo has three weeks to agree to takeover offer or face battle to replace board, lower offer
Computerworld - Microsoft Corp. today told Yahoo Inc. that it has three weeks to agree to its unsolicited $42 billion takeover bid or face a proxy fight and possibly a lower offer.
"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board," said Microsoft CEO Steve Ballmer in a letter he sent to today Yahoo's board.
Ballmer added that if Microsoft was forced to take an offer directly to Yahoo's shareholders, it would most likely reduce its offer.
"It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo's shareholders and employees," Ballmer said. "We think it is critically important not to let this window of opportunity pass."
"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective, which will be reflected in the terms of our proposal," Balmer wrote.
Yahoo, in a response Monday morning, said Microsoft's offer undervalues the company, but added that it is "not opposed to a transaction with Microsoft if it is in the best interests of our stockholders."
Ballmer said even though Microsoft made its offer to acquire Yahoo at 62% above Yahoo's market value on Jan. 31, the day before Microsoft giant made its offer, Yahoo has continued to drag out the process.
Microsoft's bid was initially worth $44.6 billion. However, a decline in Microsoft's share price means the offer is currently about $42 billion.
Yahoo rejected Microsoft's offer on Feb. 10, saying it undervalued the company.Ballmer said although there has been some interaction between executives at the two companies, there has not been any meaningful negotiation to conclude a deal.
The companies met earlier this week, but because Microsoft executives did not raise their offer, Yahoo officials refused to talk further.
"We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we've seen no indication that you have authorized Yahoo management to negotiate with Microsoft," Ballmer said in the letter.
Although there have been rumors about a deal that would merge Time Warner Inc.'s AOL Internet business with Yahoo, industry observers have said the mostly likely outcome is expected to be an acquisition by Microsoft, in part because no company wants to take on the software giant. Yahoo has also looked to Google Inc. and News Corp. to help stave off Microsoft, but to no avail.
"By any fair measure, the large premium we offered in January is even more significant today," Balmer said. "We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects."
In March, Yahoo told investors that the company will roughly double its operating cash flow from $1.9 billion to $3.7 billion and generate $8.8 billion in revenue, excluding costs, in 2010.
Read more about Networking in Computerworld's Networking Topic Center.



- Excel 2010 Cheat Sheet
- Register for this Computerworld Insider Cheat Sheet and gain access to hundreds of premium content articles, guides, product reviews and more.
- Digital Transformation: Creating New Business Models Where Digital Meets Physical
- Individuals and businesses alike are embracing the digital revolution. Social networks and digital devices are being used to engage government, businesses and civil...
- Make the Connection: Better Network Connectivity Drives Transformation
- Network connectivity is more than just plumbing. Leading organizations today see high-performance network connectivity as a critical enabler of competitive advantage, and not...
- Virtualizing Government Infrastructure
- All server virtualization solutions are not created equal. The more-with-less agenda for government agencies is tailor-made for server virtualization, which is evolving into...
- Moving Service Management to SaaS
- Today, organizations can enjoy similarly substantial benefi ts by migrating their IT service management functions to a software-as-a-service model. This paper shows how...
- Achieving 360 Degree Network Visibility with Nimsoft
- 360° network visibility is critical for ensuring continuous availability of networks, servers, and applications-anything less could
have costly bottom-line implications.
All Networking White Papers
- Optimizing Networks for the Cloud
- Join guest speaker, Rohit Mehra, IDC Director of Enterprise Communications Infrastructure, to explore current trends, discuss best practices for optimizing Data Center and...
- Unified Communications 101
- What's the best way to implement a unified communications solution for your organization?
- Try the OptiView® XG on your network - FREE
- The OptiView® XG is the first dedicated tablet with automated network and application analysis -- fastest way to root cause. XG raises the...
- Apps QuickStart Series Part 2: Designing and Deploying SQL Server on VMware vSphere
- Download this webcast to learn about the design considerations for virtualizing SQL workloads, performance and scalability information and high-availability options, as well as...
- Apps QuickStart Series Part 1: Designing and Deploying Exchange 2010 on VMware vSphere
- Download this webcast to learn the virtual hardware design considerations for Exchange 2010, deployment using the building block approach, options for high-availability and... All Networking Webcasts