Yahoo to Shareholders: Google Is Better for Us Than Microsoft

Posted by SM Maulana

By Miguel Helft

In a new letter to its shareholders on Wednesday, Yahoo once again explained why a search advertising deal between Yahoo and Google is far superior to an alternate proposal that Microsoft had made to buy Yahoo’s search business.

For those following the tit-for-tat of public statements between Microsoft and Yahoo, the letter offers little that is new, except for the following tidbit: The Microsoft proposal “would also have given Microsoft veto rights on certain future Yahoo actions, including a sale of Yahoo,” Yahoo Chairman Roy Bostock and Chief Executive Jerry Yang wrote.

Microsoft could not immediately be reached for comment.

Yahoo also said that its board tried to get Microsoft to improve the terms of its search-only offer, to no avail: “Our board of directors and management made a great effort — and conducted in depth negotiations — to elicit a feasible proposal from Microsoft that made strategic and financial sense for Yahoo!, but without success,” Mr. Bostock and Mr. Yang wrote.

The letter concludes by urging stockholders to vote for Yahoo’s existing directors, saying they are far better equipped to lead the company than a rival slate proposed by the activist investor Carl Icahn. Mr. Icahn has said little about his plans since the Yahoo-Google deal was announced on June 12.

Meanwhile, Microsoft has made it clear that its offer to buy Yahoo’s search business is still open for discussion. Some Yahoo shareholders, who say such a deal would be preferable to the Yahoo-Google agreement, cling to hopes that Yahoo will rescind its deal with Google and agree to Microsoft’s proposal.

In recent days, some large Yahoo shareholders said they have been trying to convince Yahoo’s board to do just that.

“It should be painfully obvious to the board that an independent Yahoo with a Google deal is a $22 stock heading to $18,” a large Yahoo shareholder said earlier this week. The shareholder agreed to speak on condition that he remained anonymous because of his firm’s policy against publicly discussing opinions of corporate management. Yahoo shares closed at $22.01 on Wednesday, down 3 cents. They’ve fallen about 16 percent since Yahoo announced the deal with Google.

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