Jerry Yang and Bill Gates in a Borg suit shown. - Resistance is Futile!Over the weekend Bloomberg reports that Yahoo’s board decided to reject Microsoft’s offer of $44 bn because they felt their stock was substantially undervalued but they hinted they could be drawn back to the table with a more alluring offer.

“The board spent a week reviewing the $31-per-share offer before deciding it was too low. The statement didn’t give a counter-proposal for the price. Yahoo wants at least $40, the Wall Street Journal reported this weekend.” (source Bloomberg exclusive)

Yahoo appears to be trying to save face since the offer Microsoft provided was given during a slump in their stock. It all smelled like a quasi-hostile takeover… after all, Yahoo shareholder’s could not have been too happy with the web giant’s declining value. That said, Yahoo CEO and Founder Jerry Yang is very protective of his baby and if he is going to sell out I am sure it will have to be for a price that he knows he can’t say no to.

Unfortunately Jerry Yang may not have a choice. According to a follow up article from Bloomberg, Microsoft may take the straight and undeniably hostile route and contact shareholders directly in order to influence the decision. According to Bloomber the letter of offer to Yahoo threatened the following:

“Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

Now that is considered a subtle threat… right? Haha, I think not. I expect Jerry Yang is not a happy camper right now and I can’t say I would either in his position. He obviously does not want to sell his baby but that is the sad catch-22 of having a public company; you may have a lot of money to play with but it isn’t all yours and the shareholders have power.

I am very intrigued to see how this pans out. Will Microsoft make it’s first ever public hostile takeover? How long will Jerry Yang hang on and how far will he go to keep it?

Below I have posted a graph from showing the past 5 years of “REACH” that the top search engines have experienced: (in Blue),, (Microsoft), (Microsoft), The chart serves to illustrate one very important fact that is easy to forget; Yahoo is still ahead of Google when calculating sheer reach. Yahoo simply isn’t performing as well as the markets expect which is why stocks are plummeting and layoffs are occuring. This is partially why I think Jerry Yang is so resistant to the buyout – he still sees so much potential (real or imagined).

by Ross Dunn, CEO, StepForth Web Marketing Inc.