Microsoft returns with alternative offer for Yahoo!

Mumbai: Software giant Microsoft Corporation, which had walked away from its $33-per share bid of Internet giant Yahoo! earlier this month (See: Microsoft withdraws from Yahoo!; shareholders restive with Yang), has returned to the table with an alliance rather than a complete takeover, saying that there is a renewed possibility the two companies reaching an agreement to challenge Internet's leading online search and advertising provider Google Inc.

Steve BallmerIn a statement, Microsoft said ''In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!

The software giant also said, Microsoft was not proposing to make a new bid to acquire all of Yahoo! at this time, "but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties. "There of course can be no assurance that any transaction will result from these discussions.''

The proposed deal with Yahoo! is just a shade under an acquisition, though Microsoft has reserved its right to reconsider its position about the acquisition of the Internet company.

In response to Microsoft's statement, Yahoo! said that it is open to pursuing "any transaction" in the "best interest of its investors".

Microsoft's talks give Yahoo! a chance to forge an agreement with Microsoft at a time when activist investor Carl Icahn has threatened to oust the entire Yahoo! board in order to attempt to restart negotiations with Microsoft. (See: Icahn seeks FTC clearance to acquire $2.5 billion worth Yahoo! stock; threatens proxy fight)

Observors say Microsoft's alternative deal to Yahoo Inc rather than a full acquisition was unlikely to appease Icahn, who insists that if Microsoft and Yahoo! were to combine forces, they could create ''a force strong enough'' to combat Google's dominance of the Internet.