SAN FRANCISCO — Just hours after Yahoo Inc. spurned its unsolicited takeover offer, Microsoft Corp. on Monday set the stage for a fight by pledging to clinch the technology mega-deal by any means necessary.
Yahoo formally rebuffed Microsoft after its board conducted a 10-day review, concluding that Microsoft's $44.6-billion offer "substantially undervalues" the Internet pioneer.
But the world's largest software maker, versed in the art of hardball negotiations and confident it could close the deal, made clear that it did not plan to back off the cornered Yahoo. Buying Yahoo is crucial to Microsoft's strategy of competing against online juggernaut Google Inc. in the surging business of online advertising, analysts say.
Both companies are courting large Yahoo shareholders. But no other suitors have appeared on Yahoo's horizon, and analysts have largely discounted other options that could help Yahoo remain independent, such as farming out its search advertising business to Google.
Yahoo itself left the door open to further negotiations in its rejection letter.
In a statement issued before the stock market opened, Yahoo said its board was "continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders."
Analysts said the Yahoo board was fulfilling its obligations: to give Yahoo management a shot at proposing a plan to boost the stock above Microsoft's bid, to solicit rival bidders and to wrest the highest price possible from Microsoft. Curiously, Yahoo did not say the offer was "inadequate," a code word usually used to wrest more money from suitors in hostile situations.
Investment banker Ken Marlin called the back-and-forth between the two companies "an elaborate kabuki dance" that would eventually conclude with a deal.
"No one believes that Microsoft has put their final offer on the table," said Marlin, managing partner of Marlin & Associates. "What Microsoft wants is someone to sit down and negotiate with them. The Yahoo board's not quite ready to do that. But they will get there."
Microsoft has not yet spelled out how far it is willing to go.
It could take the gentle approach and sweeten its offer enough to win over the Yahoo board -- but not so much that it alienates investors who have stakes in both companies.
