Microsoft to raise bid for Yahoo! to $33 per share

03 May 2008

Mumbai: Three months after making its first bid for the Internet giant Yahoo!, Microsoft finally seems to be getting underway with merger talks, even if it is yet to make any headway in its unsolicited bid.

Sources say that Microsoft, which was threatening to abandon its offer, or attempt to oust Yahoo!'s board, has now offered more cash, rumoured to be around $33 a share, valuing the company at around $50 billion, if Yahoo! were to come back to the discussion table, against the previous valuation of $44.6 billion, at $31 per share, reports citing sources close to the  developments said.

However, despite the anticipation, sceptics still consider the deal out at sea, with the ship showing no signs of coming in anytime soon.

If it were to come through, the Microsoft – Yahoo! Deal has the potential to reshape the landscape of competition on the internet, including the creation of some credible competition to Google's dominance of online advertising and search marketing. The higher bid is widely seen as a deal sweetener, and though details of the discussions are yet unknown, the New York Times reported that sources close to the action said Microsoft ''suggested it was willing to pay more than $33 a share.'' Yahoo!, according to reports, is sticking to its guns for at least $37 a share.

Microsoft had imposed a deadline of 26 April on Yahoo! for it to come about for a negotiated merger. However, that deadline is now a week past, and there is still no official news from Microsoft on how it plans to take the game forward. The basic bone of contention is a disagreement on what constitutes a ''fair value'' for Yahoo! Microsoft's first offer on 31 January this year was a stock-and-cash offer, which was valued at $44.6 billion, at $31 a share.

Since then, there has been a decline in Microsoft's share price, and that offer was worth $29.40 a share on Friday, 2 May. Yahoo!'s repetitive defence has been that Microsoft's offer ''undervalued the company'', though co-founder and chief executive Jerry Yang is reported to be open to a deal with at a better price.