Bill Gates told Reuters that, with or without Yahoo, the company would be investing heavily in Web search over the long term to compete with Google. Whether genuine or a negotiating position, Gates’ remarks also suggest that there won’t be any significant adjustments in the bid amount, currently valued at just over $41 billion and down from the original $45 billion because of a drop in the price of Microsoft’s stock. Gates is quoted in the article as saying, “There is nothing new in terms of the process. We’ve sent our letter and we’ve reinforced that we consider that it’s a very fair offer.”
Postscript: My reading of Gates’ remarks must be accurate because the NY Times is reporting that Microsoft is about to launch a “proxy fight” for Yahoo:
The move, expected to cost about $20 million to $30 million, was Microsoft’s alternative to raising its $44.6 billion bid and is seen as a less expensive way to put pressure on Yahoo’s board. Yahoo rejected Microsoft’s original offer as undervalued…But raising the $31-per-share offer would cost Microsoft an additional $1.4 billion for every dollar added…By contrast, waging a proxy fight to oust Yahoo’s directors is comparatively cheaper. Much of the cost involves the hiring of a proxy solicitor and preparing mailers for Yahoo shareholders.
This amounts to a hostile takeover and ups the pressure on Yahoo’s current board to act to on potential alternatives (e.g., AOL, News Corp.) or surrender.