Yahoo Says Outlook Justifies Rejecting Microsoft

By Ville Heiskanen
Bloomberg News
Wednesday, March 19, 2008

Yahoo yesterday reaffirmed its financial forecasts and presented its case for rejecting a $44.6 billion takeover bid from Microsoft.

Cash flow may almost double in the next three years, and sales growth goals for 2009 and 2010 are higher than analysts estimated, Yahoo said in its most detailed argument since rejecting Microsoft's offer last month. That potential deserves "a significant acquisition premium," Yahoo said.

Yahoo said its operations in Asia, its No. 2 position in Web search and the potential cost savings of an acquisition show that it is worth more than what Microsoft is offering. The original offer of $31 a share has declined because of Microsoft's falling share price.

Chief executive Jerry Yang has fought to convince investors that he made the right decision as Yahoo stock trades at a widening discount to Microsoft's offer.

Shares of Yahoo rose $1.81 yesterday, to $27.66. Microsoft shares rose $1.12, to $29.42.

The Yahoo board rejected Microsoft's bid on Feb. 11.

Microsoft said it reserves the right to take any steps necessary to get its offer before Yahoo shareholders.

Purchasing Yahoo would help Microsoft take second place in U.S. Internet searches, with about a third of total queries. Google leads with about a 60 percent share, according to research firm comScore.

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