Yahoo open to further talks with Microsoft: report

Tue May 6, 10:12 AM ET

NEW YORK (AFP) - Yahoo is willing to negotiate further with Microsoft, top executive Jerry Yang said in an interview Tuesday, as he defended his handling of the aborted takeover bid.

"We were totally willing to do a transaction, and they walked away," Yahoo CEO Yang told the Financial Times, adding that he is open to renewing negotiations with Microsoft.

"We've put out a way of having them buy Yahoo, give them a path to do that. If that's what they want to do, we would be open to a conversation."

Yahoo shares sank 15 percent by the close of trading Monday but remained five dollars above the price of the stock when Microsoft made its February 1 offer, signaling that many in the market believe the deal is not dead.

"I don't think it's over," IDC analyst Karsten Weide said of Microsoft's quest to acquire Yahoo.

"I think what really happened is Microsoft called Yahoo's bluff. For now, they are singing the tune, 'Time is on my side.'"

Yahoo announced it had picked July 3 as the date for an annual shareholders meeting, expected to feature fireworks from peeved investors.

All ten members of Yahoo's board of directors are up for re-election at the meeting, and the announcement of a date opens the window for nominating people to run against the incumbents.

Yahoo stockholders will be furious and litigious, putting tremendous pressure on the firm to quickly come up with an impressive business plan or go crawling back to Microsoft, analysts believe.

"The question for Yahoo is, how long can they hold out," Weide said.

Microsoft's stock price ended Monday down slightly at 29.08 dollars, hinting that the market thinks the world's leading software maker needs a Yahoo tie-up to battle Internet advertising colossus Google.

Google's stock price climbed more than two percent, in a sign investors feel the Microsoft setback is good for the Mountain View, California-based company.

On Saturday, Microsoft yanked its Yahoo proposal, saying the struggling Internet pioneer refused to budge despite the software giant upping its offer to nearly 50 billion dollars.

Microsoft raised its offer from 31 to 33 dollars per Yahoo share during talks aimed at resolving three months of corporate dueling.

Microsoft chief executive Steve Ballmer said Yang refused to accept less than 37 dollars per share, a five-billion-dollar bump in purchase price.

Yang said earlier in his company blog that Yahoo would be better able to move forward without the distraction of a takeover bid.

"No one is celebrating about the outcome of these past three months and no one should," Yang wrote in a memo posted on the Yahoo website.

"We live and work in a competitive world and the Web is only going to get more competitive. Executing on our strategic plan is what matters most."

Analysts were all over the map in their assessment of Microsoft's decision to drop its bid for Yahoo.

Danny Sullivan of Search Engine Land said the software giant may have shot itself in the foot by refusing to come up with the extra cash needed to seal the deal.

"If Microsoft's walkaway from the Yahoo deal is indeed a ploy to save five billion dollars, Microsoft CEO Steve Ballmer may have proven himself pennywise and pound foolish," Sullivan said.

"We applaud Microsoft's decision," said Robert Breza, analyst at RBC Capital Markets. "We would expect Microsoft will look to other Internet and media properties."

Citigroup Analyst Brent Thill said that due to the lack of alternatives to Yahoo in the marketplac

e, there was a chance that both Microsoft and Yahoo could still "reconcile their differences" and join forces.

Bernstein Research's Charles Di Bona said Microsoft faced uncertainty of its own.

"We believe it is imperative that in relatively short order, Microsoft's management articulates a viable and credible new strategy for (its online services business) in the absence of Yahoo," Di Bona said in a research note.