Microsoft approaches Yahoo again

Microsoft has gone back to Yahoo - with a different proposal. The software giant is now suggesting they should combine part of their online businesses, according to the Financial Times.

Over the weekend, Microsoft issued a statement that read: "Microsoft is considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo, but not an acquisition of all of Yahoo. Microsoft is not proposing to make a new bid to acquire all of Yahoo at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo or discussions with shareholders of Yahoo or Microsoft or with other third parties."

This new offer arises just two weeks after Microsoft walked out of three-month long acquisition talks because the two parties couldn't agree on a price - Microsoft was offering US$33 (€21.18) a share, Yahoo's board demanded US$37 (€23.75) per share. It is testament to how seriously the market takes the actions of activist investor Carl Icahn, who recently has acquired a 3.6% stake in Yahoo and made it clear he would like to see the back of various board members.

Microsoft's offer makes sense because, after all, it was primarily interested in Yahoo's search engine and associated advertising business. It wants to bolster its weakness in these areas to compete against Google's dominance of that market.

Yahoo also issued a statement over the weekend in which it said it had "confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo at this time," and said it was reviewing at "a number of value maximising strategic alternatives for Yahoo, and we remain open to pursuing any transaction which is in the best interests of our stockholders."

It will be an interesting day for Yahoo's shares.