Microsoft 'plots Yahoo! boardroom coup'

Microsoft was today said to be preparing a boardroom coup at Yahoo! If the internet search engine fails to accept its $44.6bn (€30bn) bid.

The software giant is planning to use rights as a Yahoo! Shareholder to oust executives and achieve a swift takeover of the firm, the Times newspaper said.

Microsoft unveiled its deal on Friday, saying the two companies combined would be better placed to challenge search engine favourite Google.

But it also hinted at a hostile bid by reserving the right “to pursue all necessary steps” to win over the firm’s shareholders if the deal was opposed.

As a shareholder of Yahoo!, Microsoft would be able to nominate executives to be voted on by all shareholders, according to The Times. Microsoft was unavailable for comment on the strategy today.

The report comes after comments from Google’s top legal officer that Microsoft’s bid to buy rival Yahoo! Was “troubling” and could threaten the openness of the internet.

David Drummond, Google’s chief legal officer, said: “Microsoft’s hostile bid for Yahoo! Raises troubling questions.

“This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation.”

Microsoft’s proposal follows predictions that the online advertising market will double in size to around $80bn (€54bn) by 2010.

Yahoo! has so far just said its board will carefully examine Microsoft’s bid - a process that “can take quite a bit of time”, according to a message posted on the California-based company’s Web site.

The review “will include evaluating all of the company’s strategic alternatives, including maintaining Yahoo! as an independent company,” Yahoo! added.

If Yahoo! accepted the offer, competition authorities both in the US and the European Union would be likely to investigate the tie-up.

Microsoft’s approach comes a year after the two companies held talks over a possible commercial partnership to challenge Google, although Yahoo! rejected merger proposals at the time because it hoped to reap benefits from an overhaul of the business.

It also came just days after Yahoo! reported a 23% fall in fourth-quarter profits, signalling that economic difficulties in the US are spilling over into the lucrative online advertising market.