Yahoo is open to some type of transaction with Microsoft

A complete withdrawal from the table at this point might spur shareholder resentment, but Yahoo's executives and board had to make some signal in light of Microsoft's claims last week of foot-dragging.

In recognizing what many independent financial analysts termed an untenable position, Yahoo's new chairman Roy Bostock and CEO Jerry Yang responded to Microsoft CEO Steve Ballmer's "time is running out" statement on Friday by saying it would be unopposed to some kind of fair transaction with Microsoft that Yahoo's board would feel is in the best interests of its shareholders.

But the Yahoo executives stopped short of calling such a transaction a "buyout." While very craftily avoiding any specific suggestion, Yang and Bostock appeared to open the door to something less: a possible Microsoft investment in an independent company where Yang could continue to serve as "chief Yahoo." And unlike last week's April Fool's "scoop" from InfoWorld (that some misconstrued as factual, given the source), in such a circumstance, Yang would serve as chief Yahoo...of Yahoo.

"We have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders," Yahoo's chiefs wrote this morning. "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.

"Our Board has been actively and expeditiously exploring our strategic alternatives to maximize stockholder value, a process which is ongoing," they continued. "All of these actions have been driven by our overarching commitment to maximize stockholder value."

This morning's statement comes in response to last Friday's open letter from Microsoft's Ballmer, who publicly assumed a Donald Trump-like stance in trying to finalize the deal. His posture was that the economy is getting worse, and so is Yahoo's business, the longer its board chooses to postpone the inevitable.

"While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement," Ballmer wrote. "We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we've seen no indication that you have authorized Yahoo management to negotiate with Microsoft. This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.

"During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular," the Microsoft CEO continued. "At the same time, public indicators suggest that Yahoo's search and page view shares have declined. Finally, you have adopted new plans at the company that have made any change of control more costly."

Actually, the statistics have not been all that bad for Yahoo over the past few months, especially with news last month that its Buzz news aggregator service pulled to within 10% of Digg's traffic in just its first three weeks of operation.

In their response this morning, Bostock and Yang took "Steve" to task, referring to him by his first name, in an effort to regain the "king of the mountain" status.

"We regret to say that your letter mischaracterizes the nature of our discussions with you," they wrote. "We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues. Your comment that we have refused to enter into negotiations to conclude an agreement are particularly curious given we have already rejected your initial proposal, nominally $31 per share at the time, for substantially undervaluing Yahoo and your suggestions in your letter and the media that you are considering lowering the value of your proposal. Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit."

Yang and Bostock also made reference to antitrust concerns that would most certainly arise following the announcement of any transaction. That reference could be perceived as a kind of dampener on the idea of an all-out merger, and a nudge in the direction of a simple financial investment.

Such an investment would help Yahoo roll out its next generation ad platform, formerly code-named "Panama" and which just this morning was given the formal brand AMP. That move reveals Yahoo's interest in lending as much of a face and a value as possible to what it considers its most valuable strategic asset going forward -- one which Microsoft has already expressed no interest in retaining should a merger take place.