Yahoo tries to avoid buyout; Microsoft to up its bid

Following Microsoft's surprise $44.6 billion buyout offer last Friday, we heard that Yahoo had started talks with Google to figure out an alternative to the takeover. Yahoo CEO Jerry Yang has now confirmed that his company has indeed been pursuing alternatives, although he didn't name Google or any other company in particular.

The Associated Press quotes Yang as saying in an e-mail, "Our board is thoughtfully evaluating a wide range of potential strategic alternatives in what is a complex and evolving landscape." To Yang's official response, the AP also adds that "former Yahoo employees who know Yang have no doubt he is exhausting all avenues that might allow his company to escape Microsoft's clutches."

According to analysts, if Yahoo doesn't go through with the Microsoft deal, it would either need to find another company willing to acquire it or to "make radical changes" in order to satisfy shareholders. However, few companies have the financial power to outbid Microsoft, and a buyout or partnership offer by Google may be rejected by antitrust regulators.

Faced with Yahoo's response and a buyout offer that has already lost a fair amount of its value, Reuters says analysts believe Microsoft will increase its bid in an attempt to put more pressure on Yahoo. "In a hostile deal the acquirer usually does not lead with its best and final offer and we would not be surprised to see Microsoft sweeten the pot somewhat to make the decision easier for Yahoo's board," investment bank UBS has stated in a note to investors.

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