NEW YORK/SAN FRANCISCO - Yahoo Inc. and Microsoft Corp.
traded new accusations over the latest breakdown in deal talks, as the battle
for control of Yahoo heated up ahead of an August 1 showdown.
Activist investor Carl Icahn, leading a proxy campaign to
dump Yahoo's current management and board at the August shareholder meeting,
blasted Yahoo for rejecting a joint proposal he made with Microsoft that he said
contained enhanced protections to Yahoo and its investors.
All three parties were involved in talks on Friday on a new
Microsoft offer to buy Yahoo's search business and take a 14 percent stake in
the Web pioneer if it agreed to shed its Asian assets and focus on its remaining
businesses.
During the negotiations, according to Icahn, Microsoft Chief
Executive Steve Ballmer said Yahoo's concerns over who would control the company
were a distraction from the deal at hand. "'First, tell us if you like the
deal,"' Icahn quoted Ballmer as saying.
"Microsoft and Mr. Icahn are trying to dismantle the company
and deliver our search business to Microsoft on terms that would be
disadvantageous to Yahoo stockholders," Yahoo Chairman Roy Bostock said of the
latest Microsoft offer.
Yahoo turned down that offer Saturday night, complaining that
it had only 24 hours to consider a deal it called financially inferior and more
risky than its current business prospects and a search ad partnership with rival
Google Inc.
Yahoo also said it was now open to a full-scale merger with
Microsoft if it offered at least $33 a share.
Yahoo shares closed down $1, or 4.2 percent, to close at
$22.57, while Microsoft shares fell 10 cents, or 0.4 percent, to close at
$25.15, both on Nasdaq.
Sandeep Aggarwal, an Internet sector analyst with brokerage
Collins Stewart, said investors are discounting the prospect of a full-scale
Microsoft merger.
"What is becoming increasingly clear is that Microsoft's
heart is set on Yahoo search," Aggarwal said.
ULTIMATUM?
For its part, Microsoft said it made the new offer in
response to a request for a new proposal from Bostock.
Microsoft denied it set a 24-hour ultimatum, saying it was seeking only a
commitment by Yahoo to accept the framework and agree to a timeline to move to
intensive talks. - Reuters
