Microsoft May Bump Up Yahoo Bid

by , 12:10 PM EDT, March 25th, 2008

Microsoft isn't ready to give up on its bid to buy out the Internet search company Yahoo and may raise its US$31 per share offer. Citigroup analysts expect that eventually the two companies will reach a buy out agreement despite Yahoo's talks with other companies, according to Reuters.

"While we continue to see no other competing bidders, we believe Yahoo is aggressively pursuing strategic alternatives," said Citigroup analyst Mark Mahaney. He added "We believe this could serve as a forcing function to a higher Microsoft bid."

Microsoft presented Yahoo with an unsolicited buy out offer at the beginning of February after the search company reported a 23 percent drop in earnings.

Yahoo rejected the buy out offer claiming that the bid undervalued the company. Microsoft responded reaffirmed its plans to continue pursuing the buyout by stating "Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal."

Yahoo has since revealed that it has been involved in talks with Time Warner to take over control of AOL. If approved, the deal would give Time Warner a minority stake in Yahoo and make Microsoft's take over attempt far more difficult.

Should Microsoft successfully take over Yahoo, the new assets would put the Redmond-based company in a better position to take part of the online advertising market from Google.