The Yahoo board formally rejected Microsoft's $44.6 billion offer for the internet company - almost certainly prompting a higher bid from the software giant.
The rejection on Monday was widely expected, following a series of weekend media reports. Analysts noted that Yahoo did not reject the bid out of hand, but was clearly angling for an improved price.
"Yahoo's board of directors has carefully reviewed Microsoft's unsolicited proposal with Yahoo's managemnt team, and financial and legal advisers, and has unanimously concluded that the proposal is not in the best interests of Yahoo and our stockholders,' the company said in a statement.
'After careful evaluation, the board believes that Microsoft's proposal substantially undervalues Yahoo, including our global brand, large worlwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow, and earnings potential, as well as our substantial unconsolidated investments,' the company said.
Microsoft said in a statement Monday that it was 'unfortunate' that Yahoo did not accept its offer. 'We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.
"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.
Microsoft announced its bid on February 1, offering $31, a 62% premium above Yahoo's closing price.