Yahoo Inc.'s directors met Friday to weigh the company's strategic options, but remained undecided about which path the Internet portal should pursue.
Yahoo's advisers gave the board their latest assessment of Yahoo's' options. These include deepening negotiations with Time Warner Inc.'s AOL and Google Inc., or engaging with Microsoft Corp. to discuss its unsolicited takeover offer.
Yahoo is in talks with Time Warner about combining with AOL. Under that scenario, Time Warner would fold AOL into Yahoo and make a cash contribution in return for an equity stake of about 20%, according to people familiar with the matter.
The proposed deal would value AOL at about $10 billion. That valuation excludes AOL's fading dial-up Internet-access business, which had complicated negotiations with potential partners in years past.
Yahoo also has been talking with Google. Wednesday, the two companies announced a two-week test in Steve Ballmer which Yahoo will carry Google search advertisements next to a small portion of its Web search results. Yahoo and Google are studying a broader search-advertising pact, which could allow Yahoo to demonstrate that it is worth more than Microsoft has offered, according to people familiar with the matter. Antitrust experts have said such a pact likely would raise regulatory issues.
Friday's meeting capped a tumultuous week for Yahoo. It began with a testy exchange of letters between Microsoft Chief Executive Steve Ball-mer and the Yahoo board.
Frustrated that Yahoo hasn't embraced Microsoft's offer, Mr. Ballmer gave the board three weeks to cut a deal or face a proxy fight. He also hinted that Microsoft would cut its bid if Yahoo didn't agree to a friendly deal. Yahoo responded with a letter of its own in which it called his ultimatum "counterproductive."
Yahoo rejected Microsoft's unsolicited $44.6 billion stock-and-cash offer in February, saying that it undervalued the Internet company. Since then, the value of the offer has declined because of a drop in Microsoft's share price. It is currently valued at about $42 billion.
News Corp., owner of Dow Jones, the publisher of The Wall Street Journal, has held discussions with Microsoft about joining its bid but people close to the software company say it plans to pursue Yahoo on its own.
By: Matthew Karnitschnig
Wall Street Journal; April 11, 2008
