Yahoo stays silent as Microsoft deadline nears

Business Materials 26 April 2008 06:20 (UTC +04:00)

Yahoo maintained a defiant silence Friday on Microsoft's 40-billion-dollar takeover bid, as Saturday's deadline to wrap up the deal came down to the wire, dpa reported.

Instead of publicly responding to the software giant's ultimatum, Yahoo ignored the issue entirely and instead unveiled plans to rewire its Internet services to make them more flexible for users and more compatible with other websites.

The announcement of Yahoo's intended conversion to a social hub was made at the Web 2.0 conference in San Francisco by Yahoo chief technology officer Ari Balogh, who dubbed the initiative "Yahoo Open Strategy." The announcement reinforced expectations that the internet pioneer would remain steadfast in its rejection of Microsoft's bid, which Yahoo argues fails to take into account the company's imminent growth prospects.

Under the new system, Yahoo's 500 million users will be able to seamlessly integrate content from across Yahoo's entire web empire into their personal network. The idea is to combine Yahoo's popular mail, instant message and personalized web pages with features from Yahoo's photo-sharing site Flickr, its bookmarking site del.icio.us and others.

Yahoo will also open its application platform to outside developers to allow third parties to create apps that work across the network and help create a social networking site that through sheer numbers of users and applications could quickly overtake current market leaders like MySpace and Facebook. The system is not expected to debut before 2009.

"We are not building another social network," Balogh told more than 1,000 attendees at the Web 2.0 Expo conference in San Francisco. "We are building social into everything we do."

Since Microsoft unveiled its original 44-billion-dollar cash and stock offer in February, Yahoo has determinedly sought other suitors to help it remain independent. However its attempts to forge an alliance with News Corp floundered when Rupert Murdoch's company allied with Microsoft.

Yahoo's plans for more limited alliances with Google and AOL have failed to convince many stockholders that they will yield more advantages than Microsoft's bid which offers a 60 per cent premium on Yahoo's pre-bid share price.

With Yahoo appearing resolute in resisting Microsoft's current bid, analysts are split on whether Microsoft will walk away, sweeten the offer, or launch a hostile bid that would try to circumvent Yahoo's board of directors.

But with Yahoo unable to offer any compelling alternative to investors in the short term, Microsoft is unlikely to increase its offer, most analysts believe.

If Microsoft remains determined to do a deal it may be able to pick up Yahoo for less by waiting a few months. With Yahoo's latest earnings reports showing disappointing results the company's stock is liable to drop precipitously if Microsoft withdraws.

Microsoft has also assembled an alternative board it could try to have elected in a proxy battle, but it is far from clear whether it has the votes to succeed.

"It's not clear if they would be successful," Steve Weinstein, an analyst with Pacific Crest Securities told Forbes magazine. "It's a possibility, but not a certainty."