Yahoo has rejected Microsoft's bid to buy the company for more than $40 billion.
"[The] Board of Directors has carefully reviewed Microsoft's unsolicited proposal with Yahoo's management team and financial and legal advisors and has unanimously concluded that the proposal is not in the best interests of Yahoo and our stockholders," Yahoo said in a statement. "After careful evaluation, the Board believes that Microsoft's proposal substantially undervalues Yahoo."
The New York Times and the Wall Street Journal both reported Saturday that Yahoo was preparing to reject Microsoft's bid and would make an announcement this morning.
This morning the Wall Street Journal said Yahoo could pressure Microsoft to up its bid to $40 per share, which would exceed $51 billion.
Microsoft's initial half-stock, half-cash bid was $31 per share, which at first amounted to $44.6 billion but, because of drops in Microsoft's share price, is now roughly $41.8 billion, according to Reuters and InternetNews.com. That article also noted that Yahoo stock last touched $40 two years ago.
The Times of London and the Journal reported that, having rejected Microsoft's bid, Yahoo may seek to merge with AOL. "Although Yahoo! and AOL previously failed to join forces because of differences over price, it is hoped that the urgency created by an unwelcome approach from Microsoft and an impending economic downturn will spur the two into new talks," The Times said.
Meanwhile, according to USA Today, the president of the investment firm Ironfire Capital has organized a group of 100 Yahoo shareholders who support Microsoft's bid to buy Yahoo. Ironfire President Eric Jackson told the newspaper that it would be "ludicrous" for Yahoo to turn down Microsoft.
Microsoft deemed it "unfortunate" that Yahoo had rejected its offer and indicated that its position on the deal remained unchanged.
"[W]e are confident that moving forward promptly to consummate a transaction is in the best interests of all parties," Microsoft said in a statement. "A Microsoft-Yahoo combination will create a more effective company that would provide greater value and service to our customers. Furthermore, the combination will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising."