Yahoo Calls Microsoft Out on Bid Ultimatum - Page 2

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Bostock and Yang took issue with both comments. "We regret to say that your letter mischaracterizes the nature of our discussions with you. We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues," they wrote.

On the second point, they noted that Yahoo recently reaffirmed that it is on target to meet the revenue numbers that it offered as guidance for both the first quarter and the full year.

Regardless of what they might think personally, Bostock and Yang are duty-bound to maximize value for their shareholders, and today's letter acknowledged that responsibility.

"We are open to all alternatives that maximize shareholder value. To be clear, this includes a transaction with Microsoft if it represents a price that fully recognizes the value of Yahoo," they wrote. "Lastly, we are steadfast in our commitment to choosing a path that maximizes stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value."

Despite Microsoft's assurance that it would not raise its bid, that remains the likely scenario in the minds of many analysts.

A higher bid coming?

Citigroup analysts Mark Mahaney and Brent Thill put out a research note today setting a target for Yahoo of $34 a share, where it expects the deal will ultimately be reached.

"A letter like that is designed to intimidate people," Weide said of Ballmer's communiqué. "For all their thunder, I still think they're going to increase their offer at some point."

But Youssef Squali at Jeffries & Co. took Microsoft's letter a little more seriously, setting a target for Yahoo at the initial offer of $31, pointing out that Yahoo's only real alternative would be to go it alone, which would likely bounce its stock down to the low twenties or high teens.

In the meantime, Yahoo can be expected to make more product announcements leading up to the shareholders meeting June 12. Weide believes that Microsoft has every intention of pressing forward with the nomination of a slate of dissident directors, and continuing to lobby Yahoo's institutional shareholders to support its acquisition bid.

"It all comes down to whether investors believe that Yahoo can turn it around," Weide said.

So the dance continues.