The internet company has rejected a $44bn (about £22bn) offer from Microsoft which was made out of the blue two weeks ago.

"After careful evaluation, the Board believes that Microsoft's proposal substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments," Yahoo said in a statement.

The deal had valued Yahoo's share price at the time, but since then the price of shares in Yahoo has climbed to a higher value than Microsoft's original offer.

Microsoft expressed its disappointment at the "unfortunate" snub.

"It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. 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," a Microsoft statement said.

Microsoft had said when it made the offer that a partnership between the two companies could "create a more efficient company with synergies" in areas such as advertising, innovation and operational efficiency.

Search giant Google had looked like the company with the most to lose from a potential Yahoo-Microsoft tie-up, and made its reservations about the deal clear.

"Microsoft's hostile bid for Yahoo raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the internet: openness and innovation," said David Drummond, Google's chief legal officer.

Google was also reported to have made a counter-offer to Yahoo to ward off the threat of Microsoft's hostile takeover.

Today's statement from Yahoo doesn't rule out another bid from Microsoft or a bid from any other company being accepted.

"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," the statement said.

www.yahoo.co.uk
www.microsoft.com
www.google.co.uk

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