Microsoft Corp. met with Yahoo Inc. to discuss the software makers unsolicited takeover bid earlier this week, a breakthrough that could be the first step toward a friendly deal between the two rivals.The meeting occurred Monday near Yahoos Sunnyvale headquarters, according to a person familiar with the situation. The person spoke Friday on the condition of not being identified because the preliminary talks havent been formally disclosed.
No investments bankers attended Mondays meeting, nor was there any discussion about whether Microsoft is willing to raise its offer, initially valued at $44.6 billion, or $31 per share. Yahoos board already has rejected that bid, arguing the companys Internet franchise is worth more.
Although its unclear whether Microsoft Chief Executive Steve Ballmer and his Yahoo counterpart, Jerry Yang, attended Mondays meeting, senior management from both companies were on hand.
The gathering, first reported by The Wall Street Journal, gave Microsoft its first chance to sell Yahoo on the rationale for the proposed marriage since the software maker unveiled its plans six weeks ago.
Since then, Yang has been exploring different ways to ward off Microsoft. The alternatives have included possible alliances with Internet search and advertising leader Google Inc., News Corp.s MySpace.com and Time Warner Inc.s AOL.
Microsoft has held firm with its bid and warned its prepared to pursue a hostile takeover if Yahoo continues to resist.
Most industry analysts believe neither side wants to engage in an acrimonious battle and expect Microsoft to resolve the impasse with a slightly higher bid.
Investors arent so sure the stakes will be raised. Yahoo shares fell 79 cents to $26.71 Friday while Microsoft shares shed 66 cents to $27.96. At that price, Microsofts offer — made partly in Microsoft stock — is worth about $40 billion.
The saga could still take several weeks to play out and may not be resolved until Yahoo releases its first-quarter earnings April 22. With Yahoo mired in a two-year slump, the first-quarter results could sway Microsofts next move.
The waiting game works in Googles favor by distracting two of its biggest rivals while it strives to extend its dominance of the Internets lucrative search and advertising market. Google added another layer of muscle this week by completing its $3.1 billion acquisition of online ad service, DoubleClick Inc.
Microsoft believes a combination with Yahoo will pose a more serious threat to Google.
By finally meeting with Microsoft executives, Yahoo could be laying the groundwork for more serious negotiations. Or Yahoos board could just be touching base with Microsoft to show shareholders that it heard out its suitor before working out an alternative deal.
Yahoos other options have been considered a long shot by most analysts and now there are signs that at least two of its potential partners arent interested in getting together.
Rupert Murdoch, the chief executive of News Corp., downplayed his interest in a Yahoo deal at a conference this week. And AOLs plan to buy online social network Bebo for $850 million in a deal announced Thursday may make a combination of AOL with Yahoo more complicated.
Google has offered to work with Yahoo, but analysts say antitrust regulations will make it difficult, if not impossible, for those two companies to become business partners.
Yahoo still doesnt appear to be any rush to resolve the saga, based on how its handling a key deadline for nominating candidates to supplant its current board. Microsoft has threatened an attempt to oust Yahoos 10 directors if it cant broker an amicable takeover.
Last week, Yahoo postponed the deadline from Friday to 10 days after the date Yahoo announces its annual meeting.
Yahoo has no plans to disclose the meeting date before April and may not do so until its first-quarter earnings come out, according to a person close to the company. The person wasnt authorized to be identified publicly.
Source- http://news.yahoo.com/s/ap/20080315/ap_on_hi_te/microsoft_yahoo;_ylt=AtmJ77l8srfgjtB6dDGwtmkjtBAF
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