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SAN FRANCISCO - Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6-billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.
The decision could provoke a showdown between two of the world's most prominent technology companies with Internet search leader Google Inc. looming in the background.
Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.
If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer - originally valued at $31 per share - directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.
Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.
Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to the Associated Press.
Microsoft and Yahoo declined to comment Saturday on the decision, first reported by the Wall Street Journal on its Web site.
[Last modified February 10, 2008, 01:32:10]