Yahoo Tries To Stall Microsoft Takeover

Yahoo originally had until March 14, which could have pitted Microsoft and Yahoo into a proxy contest next week. To ward off an unwanted and unsolicited Microsoft takeover and buy some extra time, Yahoo on Wednesday said the deadline for nominations would now fall 10 days after it announces the date of its annual shareholder meeting, a date for which is pending.

Yahoo has explored pairings with several other Internet and media companies that would allow it to retain more independence. Talks about a deal with Time Warner's AOL division have accelerated, according to a Reuters story citing a source that was briefed on the discussions. Yahoo has also been in chats with media giant News Corp.

"It's an indication that probably Yahoo is less receptive to Microsoft than was initially believed," said analyst Jeffrey Lindsay of Sanford C. Bernstein.

Lindsay added: "It looks as if they've bought themselves several weeks by proposing this delay. It's probably the maximum they can do without incurring a lot more shareholder ill-will."

In a two paragraph alert posted on its Web site, Sunnyvale, Calif.-based Yahoo said "it has amended the company's bylaws to extend the deadline for nominating directors to Yahoo's board from March 14 to 10 days following the public announcement of the date for Yahoo's 2008 annual meeting of stockholders."

Recognizing that the date of the annual meeting has not been set, Yahoo noted that "the amendment will give stockholders who want to nominate one or more directors, including Microsoft Corp., more time to do so. The amendment does not preclude any party from nominating one or more directors at any time prior to the new deadline."

Yahoo indicated the extension of the deadline has the effect of postponing the nomination of one or more directors by any party, which will allow Yahoo's board to continue to explore alternatives "for maximizing the value for stockholders without the distraction of a proxy contest."

Yahoo and Microsoft acquisition discussions came to a head last month when Yahoo rebuffed an offer that Microsoft made public valuing the company at $31 per share in cash and stock, a deal Yahoo said grossly undervalues its worth. A Microsoft-Yahoo mash-up would combine the software giant and ailing Internet search company creating a competitive herculean force against online behemoth Google.

"We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," Microsoft's CEO Steve Ballmer said February 1 in a prepared statement. "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."

Microsoft representatives couldn't be reached for comment on Wednesday.

In a letter to employees, which was also filed with the U.S. Securities and Exchange Commission, Yahoo CEO Jerry Yang said the extension would still allow Microsoft to nominate directors to the board, but the main aim was to create some breathing room.

"In light of the current circumstances, this change removes an imminent deadline," Yang wrote in the letter, posted on the SEC's Web site. Yang added that while Redmond, Wash.-based Microsoft could still name directors, the "objective here is to enable our board to continue to explore all if its strategic alternatives."

Yang concluded the letter by asking employees to ignore published reports about the possible buyout and continue business as usual.

"We ask you to continue to put aside all the rumor and speculation you may be hearing," he said.