Yahoo Inc.'s rejection of Microsoft Corp.'s unsolicited takeover bid left investors guessing the next move in a tense mating dance that may hatch a more imposing challenger to Google Inc. or disintegrate into a bruising brawl.
The rebuff, formally announced early Monday, wasn't a surprise because Yahoo had leaked its intention over the weekend.
As expected, Yahoo's board unanimously decided to spurn Microsoft after concluding the offer -- originally worth $44.6 billion or $31 per share -- "substantially undervalues" one of the Internet's prized franchises. The cash-and stock deal is now valued at about $40 billion, or $28.91 per share because of a drop in Microsoft's market value.
But Yahoo didn't raise antitrust concerns about the proposed deal and included language that seemed to invite a higher offer from Microsoft, the world's largest software maker.
"The board of directors is 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," Yahoo said in a statement.
Microsoft, though, didn't seem inclined to raise the bid Monday, releasing a statement describing its current bid as "full and fair."
Calling Yahoo's decision "unfortunate," Microsoft didn't back off from its quest either. "Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties," the Redmond, Wash.-based company said.
Microsoft also emphasized it's prepared to "pursue all necessary steps" to get the deal done, raising the prospect that it could take the bid directly to Yahoo shareholders with a so-called "exchange offer" or escalate the acrimony even further by trying to oust Yahoo's 10-member board later this year.