Yahoo! may spurn Microsoft advances and buy AOL

11 Feb 2008

The boss of online portal Yahoo!, Jerry Yang, is understood to be preparing a letter rejecting Microsoft’s US$44.6bn hostile bid for the company as following on from a week of deliberation, the company is considering buying AOL instead.

This unexpected twist in the saga could see Yahoo!, which has 137 million users, snap up AOL with its 120 million users, creating an internet powerhouse for both Microsoft and Google to reckon with.

The move could also be construed as a way for Yahoo! to ensure value for money for concerned but loyal shareholders who fear the value of their investment may plummet.

It is understood Yahoo!’s board of directors spent the past week evaluating possible alliances with technology and media players which would save it from being subsumed into Microsoft.

Possible mergers/tie-ups with other internet players including Disney and Google are also understood to be under consideration.

Both Yahoo! and AOL were once considered the internet’s major players but their fortunes began to wane in recent years as Google found its groove in innovation and online advertising and Microsoft, finally alert to the power of the internet, put its considerable muscle into playing catch-up.

It appears Yahoo!’s Yang is intent on playing hardball with Microsoft. Reports suggest he will tell Microsoft that he will not consider a bid of less than US$40 a share, some US$9 more than Microsoft’s offer of US$31 a share.

But despite Yahoo!’s potential hardball tactics, the consensus among analysts is that Microsoft will also play hardball considering its offer of US$44.6bn values Yahoo at 62pc more than its closing price on 31 January.

By John Kennedy