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Yahoo rejects Microsoft takeover bid

Yahoo formally rejected Microsoft's unsolicited $31-a-share takeover bid today, claiming the offer — which values Yahoo at around $41bn (£21bn) — was too low.
The internet firm said it had "carefully reviewed Microsoft's unsolicited proposal with Yahoo's management team and financial and legal advisers and has unanimously concluded that the proposal is not in the best interests of Yahoo and our stockholders".
Yahoo's shares rose 0.8 per cent to $29.43 in morning trading on Wall Street, indicating that traders believe a larger bid may follow. Shares in Microsoft, which must now decide whether to come back with a higher bid, go hostile or walk away from a deal, were down almost 2 per cent.
The Yahoo board had spent 10 days reviewing the bid, during which time it fell in value by around 7 per cent along with Microsoft's share price.
The software giant is proposing to pay $31 each for half of Yahoo's outstanding shares and 0.9509 of a Microsoft share for the other half. On February 1, when the offer was announced, this valued its target at $44.6bn and was a 62 per cent premium on Yahoo's share price before the bid. But while Yahoo's shares have since soared, Microsoft's share price has dropped steadily.
Media reports over the weekend claimed Yahoo's board had concluded that a $40-a-share offer would be fair. This would value the company at more than $57bn.
The Times reported today that Yahoo was exploring tie-ups with other media companies, such as Disney or AOL, as a way of avoiding being taken over by Microsoft.
Analyst firm Sanford C Bernstein predicted in a note to clients that Microsoft would increase its offer to $35 a share and could go as high as $40.
Other analysts say Yahoo's board believes the company is worth more than $31 a share because recent changes in strategy have not yet come to fruition.
"The board is saying, 'We think we can keep the company together and do far better with it than Microsoft ever will,''' said Daniel Taylor, an analyst at research firm Yankee Group in Boston.
If the deal goes through, it would create an online search and advertising group that could rival the market leader, Google. Between them, Microsoft and Yahoo offer desktop, mobile and server operating systems, office applications, online services such as email and search, photo sharing and social bookmarking.
Microsoft made its offer just a few days after Yahoo announced a sharp drop in profits and said it would cut 7 per cent of its staff.
Some commentators believe Microsoft is unwilling to launch a hostile bid because the resultant disruption could encourage Yahoo staff to seek alternative employment, making a succesful integration of the two companies more difficult.

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Virgin bid for ITV was 'a moment in time'

The acting Virgin Media chief executive, Neil Berkett, today described its attempt to buy ITV as "a moment in time", apparently quashing any chance that it might revisit the scheme.
The cable company approached ITV about a potential takeover in November 2006 only to see its plan thwarted by satellite rival BSkyB, which bought a 17.9% stake in the producer and broadcaster.
"The bid for ITV was a moment in time, which was a view of the apparent value of the asset, a view of what Virgin Media could do with that asset and a view of potentially monetising some of our tax position," Berkett said today at a Broadcasting Press Guild lunch.
"The market is completely different today to what it was then and for us to reconsider anything in the acquisition of a production [company], an ITV lookalike, we would have to view it on its merits. But I'm not commenting on our M&A [merger and acquisitions] activity."
He added: "If you look at any organisation they will take their strategy and they will look at the assets that become available in the context of that strategy and the context of the time."
Berkett also cast doubt on the wisdom of Sky's move, which looks set to be unravelled at a potential cost of £250m, after the government told the satellite broadcaster to sell down its ITV stake.
He added: "The flipside is was it sensible for somebody else to acquire 18% of ITV? Was that part of their strategy? Does that mean they don't have a clearly defined position?"
Berkett added that Virgin was now focusing on emphasising the technical superiority of its broadband offering, which it is starting to make available at super-fast speeds of 50Mb.
He described broadband as Virgin's "hero product" alongside the rest of its quad-play offering of TV, fixed-line telephony and mobile.
Berkett said Virgin was concentrating on "mid-range" customers rather than taking on Sky at the premium end of the market for exclusive TV rights to sport or films.
"That happens to be where the profit pool is growing," he said. "In premium TV we don't have an advantage and the profit pool is stagnating."
The company would not be investing in premium content such as sports rights, Berkett added.
"Unless there's a change in the regulatory landscape, you won't see us put shareholder capital in premium content, although I happen to think there should be a change in the regulatory landscape," he said.
Despite the failed ITV bid, the company retains an interest in TV programming through owning Virgin Media TV, formerly Flextech, which operates channels including Living TV and a 50% share of UKTV, a joint venture with BBC Worldwide.
Berkett also pointed to other content ventures such as Virgin's collaboration with Setanta and ITN to set up a sports news channel to rival Sky Sports News.
"The biggest mistake we could make in broadband would be to become a utility and therefore how we ensure we are not just a pipe is absolutely critical in evolving the strategy," he said. "Content control and content in some shape or form has to be a critical component of that."
Berkett has been acting as chief executive since August, when Steve Burch left Virgin.
He said it was for the board decide who the permanent replacement would be, adding that he would like to continue as chief executive.