Microsoft may cut $44.6b Yahoo bid
SAN FRANCISCO - Microsoft Corp. is examining whether to cut its $44.6 billion offer for Yahoo Inc. because a US economic slowdown has hurt the Internet company's business, according to two people with knowledge of the matter.
The companies haven't made progress on negotiations since Yahoo rejected the bid in February, and there are signs that Yahoo's business has since deteriorated, one of the people said. They declined to be named because the talks are private.
The possibility of a lower bid may step up pressure on Yahoo chief executive Jerry Yang, who had sought an alternative that would appeal to investors. Since then, Federal Reserve chairman Ben S. Bernanke has said the United States may be in a recession after losses tied to the collapse of the subprime mortgage market. The current offer is 62 percent higher than Yahoo's closing price the day before the offer was disclosed.
"They are probably realizing that by the time the fight is over, Yahoo's value will have decreased a bit in the current macro environment," said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. Yahoo's "best opportunity was to take the Microsoft offer and turn it into friendly negotiations." He expects Yahoo to perform in line with its peers.
Reuters reported earlier that Microsoft was reevaluating its offer. A Yahoo spokeswoman and a representative for Redmond, Wash.-based Microsoft declined to comment. Microsoft, the world's largest software maker, offered $31 a share for Yahoo on Jan. 31. Sunnyvale, Calif.-based Yahoo rejected the offer Feb. 11.
Microsoft is pursuing Yahoo to combine the second and third most popular US Internet search engines to take on Google Inc., which now gets more than half the queries.
Before the offer, Yahoo had reported eight straight quarters of profit declines. Yang, who cofounded the company, replaced Terry Semel as chief executive last year to reignite growth.
Yahoo's share of the US search market fell to 21.6 percent in February from 22.2 percent the previous month, while Microsoft dropped to 9.6 percent from 9.8 percent, according to Reston, Va.-based ComScore Inc. Google rose to 59.2 percent from 58.5 percent.
