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The Yahoo headquarters in Sunnyvale,
California. (Xinhua/AFP File Photo)
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LOS ANGELES,
Feb. 20 (Xinhua) -- Microsoft's fight to take over Yahoo seems inevitable after
its Chairman Bill Gates made tough comments on its offer this week.
In his comments, Gates indicated that his company
would not negotiate with Yahoo for a raised acquisition price and is ready to
wage a proxy battle for control of the Silicon Valley search engine.
Through such a battle, Microsoft would try to
nominate its own directors for Yahoo's board, hoping that a majority of
stockholders would support its 44.6-billion-dollar offer and effectively hand it
control of the company, analysts and observers said Wednesday.
Latest news reports revealed that Microsoft has hired
a proxy-solicitation group to help oust Yahoo's 10-member board, all of whom up
for re-election later this year.
If Microsoft is serious about waging the hostile
proxy battle, its next move would be to demand a list of Yahoo's shareholders so
it can contact them individually. The election for new Yahoo directors is
expected to occur at the company's annual meeting, often held in May.
A proxy battle would cost Microsoft 20 million to 30
million dollars, much less than the price it would pay if it raises its bid,
according to industry merger and acquisition experts.
And that price is low compared with recent two
high-profile tech merger battles in Silicon Valley.
Hewlett-Packard reported a cost of 75 million dollars
in 2002 for advertising and proxy solicitation in connection with its merger
dispute with Compaq Computer, while Oracle's hostile takeover bid for People
Soft also cost more than that amount.
The new developments could force Yahoo's board of
directors into a corner. The board last week formally refused Microsoft's
unsolicited buyout offer, arguing that the 44.6-billion-dollar offer
"substantially undervalues" Yahoo's worth.
Microsoft's readiness to wage a hostile acquisition
battle caught many analysts by surprise as many in the industry expected the
software giant to make a higher offer that would eventually lead to an
agreement.
"We sent them a letter and said we think that's a
fair offer. There's nothing that's gone on other than us stating that we think
it's a fair offer. They should take a hard look at it," Microsoft Chairman Gates
reportedly said Monday.
On Tuesday while announcing at Stanford University a
software giveaway program for college students around the world, Gates told
reporters that he hoped Yahoo would be enthused about coming together with
Microsoft.
Industry analysts said that without a credible offer
from another bidder, Yahoo would faces a battle in which Microsoft seems likely
to prevail, considering recent enthusiastic comments on the possible merger from
major Yahoo shareholders.
It was reported that nearly 90 percent of Yahoo's
institutional shareholders also hold significant stakes in Microsoft, a fact
that would complicate a deal between the two companies.
Many analysts have said that a combination of the two
companies would pose a challenge to the dominance of the lucrative online search
and advertising market by Google, which has been gaining ground on
Yahoo.
