Report: Microsoft-Yahoo continue talks for 'friendly' takeover

Talks have 'intensified'; price remains an issue

Microsoft Corp. continued talks with Yahoo Inc. today in hopes of agreement on a "friendly takeover" of the Internet company, The Wall Street Journal reported.

This afternoon, the Journal, quoting people familiar with the matter, reported that although talks between the two companies to reach a friendly deal have intensified, an agreement was unlikely to happen today. According to the Journal, the sources said that today's talks may not result in a deal at any point.

Both Microsoft and Yahoo declined comment this afternoon.

"With the right circumstances, it'll happen. Without the right circumstances, it won't happen," Microsoft CEO Steve Ballmer said in an interview with the Journal yesterday.

Microsoft's board met Wednesday to discuss its next step for the proposed deal, announced Feb. 1, which offered $44.6 billion for the Internet company. Yahoo rejected the offer, leaving Microsoft with the choices of walking away or attempting a hostile takeover. The report quoted people familiar with the matter regarding Microsoft's lean toward a takeover fight.

Ballmer also told Microsoft employees yesterday, "I will go to what I think it's worth if that gets a deal done," the report said.

Microsoft is also considering raising its bid from $29 per share to $32 or $33 per share. Yahoo rejected that offer, stating that a fairer valuation is $35 to $37 per share. Since Microsoft's own share price has declined since the February offer, the company would have to adjust its offer in order to reach the original terms of the deal, a mixture of cash and Microsoft shares.

Yahoo took its own steps yesterday, moving closer to an agreement with Google Inc. to begin carrying its ads, a deal that would bring Yahoo up to $1 billion more per year in revenue and make a Microsoft takeover more difficult.

Google, Microsoft and Yahoo have not commented publicly on the reports.

Linda Rosencrance of Computerworld contributed to this report.

Copyright © 2008 IDG Communications, Inc.

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