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Monday, May 19, 2008

Microsoft’s Cooperation with Yahoo! Takes a New Phase

Some days ago, we witnessed the story of Microsoft going into potential big-game partnership with Yahoo! Inc, and later by May 8, they backed off from that. But the latest in the news raises an entirely different development. It seems now that Microsoft will end up acquiring Yahoo!.

Though Microsoft earlier said that they would only consider a merger after some deeper brooding, they are likely to change their mind in this regard. But a new development happened as one of the topmost investors of Yahoo!, Carl Icahn of California, sent a letter to Yahoo! denouncing the board’s action of not accepting the Microsoft’s offer of merger.

According to him, the merger with Microsoft would prove to be better for Yahoo! as a company, and as one company, they can be better equipped against the competitors.

Being major investor in Yahoo!, Icahn’s message would have deep effects. In his letter, he also specified the opinion of other investors with the company, who collectively talked with him favoring a merger.

Microsoft had made an initial bid of $31 per share for Yahoo! but later increased it to $33. Still, Yahoo!’s steadfastness (that it would not go below $37) is under suffered denouncements from the shareholders. And to retaliate, Microsoft bought up ten nominees to oppose Yahoo! board, which gets re-elected every year.

But since, Icahn’s proxy battle would hit Yahoo! badly, Microsoft proposed a better alternative for them. Though Microsoft equivocated the alternative deal, the sources are in belief that it would finally result in an acquisition.

In pressure from Microsoft and Yahoo! shareholders, Yahoo!, which closed at about $20 per share on 18, would find it difficult to let down Microsoft’s deal of $33, which may take a fresh effect soon. Let’s wait the latest developments.

Copyright © Gayatri Jayashankar 2008