Yahoo issues defense to investors

Netco offers reasons why Microsoft bid failed

By DIANE GARRETT

Icahn

Yang

With one month to go before its annual shareholders meeting, Yahoo has issued its most elaborate defense of its failed negotiations with Microsoft yet.

The Netco on Monday filed a 32-slide shareholder presentation with the SEC that suggested Microsoft was never that serious about acquiring the company, and that its bid to buy its search biz was not in Yahoo's best interest. The filing further argues that Yahoo's board, not the dissident slate proposed by investor Carl Icahn, is best suited to run the company.

The board slate will be determined at the Aug. 1 shareholder meeting, expected to be a contentious affair. Icahn has promised to oust topper and co-founder Jerry Yang if he gets control over the board.

Yahoo has been in defensive mode ever since Microsoft withdrew its $47.5 billion offer on May 3. Microsoft subsequently proposed buying the Netco's search biz, but Yahoo instead brokered a deal with rival search giant Google.

However, some Wall Street investors, Icahn most notably, still want the two to merge. The netco's shares are sliding back toward $19.18 -- their value before Microsoft's bid. Yahoo shares fell 67¢ Monday to close at $20.66.

Yahoo issued a detailed timeline of the two companies' talks in the presentation, listing at least eight meetings before the bid was withdrawn, and two attempts to reopen sales negotiations in meetings on May 17 and June 8 before inking the Google deal. Company argued that its unsolicited suitor was "unresponsive and inconsistent" during the first three months of negotiations.

"The record casts doubt on whether Microsoft was ever committed to a whole company acquisition," Yahoo asserted.

Microsoft immediately disputed that charge, which a rep called "revisionist history." Microsoft topper Steve Ballmer initially bid $44.6 billion, or $31 per share, on Jan. 31 in an offer that placed a 62% premium on Yahoo's stock price at the time. He later upped that bid to $47.5 billion shortly before withdrawing it.

Yahoo also argues Microsoft's partial offer, which it calls a "hybrid" deal, is a "bad choice" because it wouldn't be as lucrative or as flexible as the Google partnership. Microsoft proposed paying $1 billion for the search biz and investing $8 billion in the company. Yahoo expects to gain $250 million to $450 million in incremental operating cash flow within the first 12 months of the Google pact, which has an initial four-year term.

(The Associated Press contributed to this report.)