Yahoo! willing to talk to Microsoft

Internet giant Yahoo! said today it was willing to talk to Microsoft about a potential takeover deal, but wants the software firm to up its US$41bn (€26.1bn) proposal.

Yahoo!'s statement comes as the search engine faces mounting pressure from Microsoft to negotiate.

Microsoft issued Yahoo! with a three-week deadline at the weekend, warning that if a deal is not reached by April 26 it will launch a hostile takeover at a lower price.

Microsoft launched its unsolicited offer for Yahoo! in late January with aims to create a stronger rival to Google.

Yahoo! rejected the approach in February, saying it undervalued the company, but today said it was "not opposed" to a deal, at a higher price.

Jerry Yang, chief executive of Yahoo!, and chairman Roy Bostock said in a letter to Microsoft chief executive Steve Ballmer: "We are open to all alternatives that maximise stockholder value.

"To be clear, this includes a transaction with Microsoft if it represents a price that fully recognises the value of Yahoo! on a standalone basis and to Microsoft, is superior to our other alternatives, and provides certainty of value and certainty of closing."

The letter added that Microsoft's threat to make a hostile bid was "counterproductive".

Microsoft said on imposing its bid deadline over the weekend that it would be "compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board".

"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal," said the group.

Yahoo! has looked at joining forces with other rivals in an attempt to fend off Microsoft's advances, exploring deals with firms such as Google, News Corp's MySpace.com and Time Warner's AOL.

It has failed to find an alternative to Microsoft's offer.

Microsoft said on making the approach earlier this year that it would consider taking its offer directly to Yahoo!'s shareholders if needed, as well as working to elect its own candidates to fill Yahoo!'s board at the company's annual shareholder meeting.

At the time, the cash-and-stock bid was valued at 44.6bn (€28.4bn), or 62% above Yahoo's market value.

As of Friday however, the deal was worth just under US$41bn (€26.1bn).