Yahoo! reject Microsoft

So, Yahoo! have decided that Microsofts offer of $31 a share undervalues the company. What’s intersting is that the Yahoo! board have indicated that they are willing to let the company go, but only at the right price. So what can we conclude about this?

Well, either Yahoo! are confident that they can withstand an agressive takeover approach from MS or they are holding out for a bigger pay day. Runour has it that Jerry Yang (Yahoo!’s chief) is getting board with the search engine and is looking for other ways to spend his day. This being the case, then a Yahoo! sale would suit him.

The flip side of the coin is how badly do Microsoft want Yahoo!? They clearly need a meaningful web presence beyond hotmail and are willingly to pay for it, but at what cost? $40 odd billion for a search engine is mighty gamble, even if MS can afford it. Why not just increase the marketing budget and release more free apps to compete with google. The reason google are so powerful is that they are viewed as being a ‘good’ company. One of their strengths is that their products are free to the end user, paid for by advertising. They are also very easy to use, something MS or Yahoo! have failed to match.

Expect an increased bid from MS in the next few days.