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Yahoo's High-Stakes 'No Thanks'

Whether Yang & Co. want to stay independent or are holding out for a higher bid, their rejection of Microsoft's offer is fraught with risk
A Yahoo billboard on Sixth Street in San Francisco.
A Yahoo billboard on Sixth Street in San Francisco. David Paul Morris/Getty Images

Web pioneer Yahoo (YHOO) has resisted the urge to merge with Microsoft (MSFT) for more than a year. But with its latest refusal Yahoo is playing a dangerous game.

Founder and Chief Executive Jerry Yang says that Microsoft's Jan. 31 bid, worth $44.6 billion at the time, "substantially undervalues" Yahoo. In a statement released Feb. 11, Yahoo's board cited the company's "global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments." Microsoft, the argument goes, is seizing on the drop in Yahoo's stock to buy the company on the cheap.