Yahoo rejection of Microsoft offer finds broad support

The "take it or leave it" proposal entailed selling Yahoo's search business to Microsoft and handing control of the rest of the company to Icahn, Yahoo Chairman Roy Bostock said in an interview.

It was also conditioned on the removal of Yahoo's board and management.

In a deal presented to Yahoo on Friday, Microsoft Chief Executive Steve Ballmer gave Yahoo's board 18 to 24 hours to consider the terms that were essentially nonnegotiable, Bostock said.

Yahoo's counter proposals to sell the company to Microsoft for $33 a share or to negotiate a better deal for its search business at a later date were rebuffed, Bostock said. He characterized Microsoft's behavior throughout the takeover saga as "erratic and unpredictable" and accused Microsoft of engaging in bullying tactics.

"This latest iteration is trying to bludgeon the Yahoo board into a deal," Bostock said.

Icahn could not be reached for comment. A Microsoft spokesman declined to comment.

Microsoft launched an unsolicited bid for Yahoo on Jan. 31, triggering a long and frequently bitter fight for control of the Internet company. Microsoft's newly aggressive strategy of teaming with an activist shareholder sets the stage for a contentious showdown at Yahoo's Aug. 1 annual meeting. Icahn, who succeeded in sparking discussions between himself, Bostock and Ballmer on Thursday and Friday but fell short of consummating a deal, probably will attempt to replace the Yahoo board with his nominees, including himself.

Yahoo has come under criticism from shareholders for allowing takeover negotiations with Microsoft to collapse. But the latest development in the takeover battle seemed to backfire on Icahn and Microsoft. Analysts and shareholders dismissed the proposal as a stunt to increase pressure on the Sunnyvale, Calif., company.

"It was a particularly stupid offer, and Yahoo rightly rejected it," said Sanford C. Bernstein analyst Jeffrey Lindsay.

A major shareholder in regular contact with Yahoo and Microsoft management teams agreed it would be "irresponsible" for the Yahoo board to accept the offer.