Microsoft and Yahoo talking on new deal

Published on Monday 19 May 2008 22:14

MICROSOFT is understood to be contemplating a deal with Yahoo that would not involve a full takeover of the firm – just two weeks after its £24 billion offer failed.

But the proposal is unlikely to win over financier Carl Icahn, who last week launched a campaign to replace Yahoo's board with new directors after buying a substantial stake in the company. Icahn, pictured, believes the company should reopen talks about selling itself to Microsoft, saying Yahoo acted irrationally in refusing the giant software company's offer.

Microsoft yesterday said it was in talks with Yahoo, but did not clarify what kind of deal might be reached. It said: "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."

Microsoft emphasised it was not proposing to make a new bid to buy all of Yahoo, after recently being rebuffed, but said it could reconsider in the future.

Yahoo said it continued to consider a number of strategic alternatives and was "open to pursuing any transaction which is in the best interest of our stockholders".

It said the company's board would "evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value".

It added that it had confirmed with Microsoft that the bigger firm was not interested in "pursuing an acquisition of all of Yahoo at this time".

Kim Caughey, a senior analyst at Fort Pitt Capital Group, said a joint venture or minority investment could cause confusion about who was in charge.

She said: "Microsoft walking away from Yahoo was a total fake.

"Microsoft is a terrible poker player if it thought people were going to believe that the deal was dead."