Microsoft, whose $44.6 billion bid was rejected by Yahoo's board, is prepared to spend up to $30 million on the battle, the newspaper said on its website yesterday, citing people briefed on the matter. Microsoft chairman Bill Gates said the current offer is "very fair," Reuters reported, citing an interview.
The software maker may avoid raising its price because Yahoo investors don't see its rival suitors as attractive alternatives.
Yahoo is in talks with News Corp., a person familiar with the discussions said last week. London's Sunday Telegraph said Time Warner Inc.'s AOL is in talks with Yahoo. A partnership won't help Yahoo regain the lead in search from Google Inc., said Canaccord Adams analyst Colin Gillis.
"All this talk about Yahoo combining with AOL or News Corp. is just noise," said New York-based Gillis, who advises investors buy Yahoo shares. "Shareholders would have a hard time loving a combination like that."
Microsoft said on Feb. 11 it reserves the right to pursue "all necessary steps" to win over Yahoo shareholders.
A person familiar with the matter said this month Microsoft may seek to oust Yahoo directors. Microsoft spokesman Frank Shaw declined to comment on the Times report yesterday.
All 10 of Yahoo's directors are up for reelection at the next annual meeting. Microsoft has until March 14 to nominate its own board members.
Microsoft would more than double its share of Internet searches in buying Yahoo, and save as much as $1 billion a year by reducing overlap in their operations. Yahoo chief executive Jerry Yang has resisted Microsoft's advances, pursuing another partner to keep his company independent.
Yahoo investors including Jacob Asset Management's Ryan Jacob, Legg Mason Inc.'s Bill Miller, and T. Rowe Price's Larry Puglia have said they would back a bid if Microsoft increased the price.
The Sunday Telegraph didn't cite anyone in its Sunday report. Time Warner spokesman Keith Cocozza declined to comment. Tracy Schmaler, a spokeswoman for Sunnyvale, Calif.-based Yahoo, didn't return a call Monday.
Teaming with AOL wouldn't give Yahoo investors the savings they would get with Microsoft, said Atlantic Equities LLP analyst Hamilton Faber.
This month, Time Warner chief executive Jeffrey Bewkes said he will split AOL's shrinking dial-up Internet service from the rest of the unit to focus on the online advertising division.
Yahoo said yesterday it will offer severance plans to employees affected by a change in control.
The policy covers all full-time employees and includes severance pay, health insurance, accelerated vesting of options, and job-search assistance, Yahoo said in a regulatory filing.