Microsoft Raises Yahoo! Bid, Enters Merger Talks

In a surprise eleventh-hour development, Microsoft on Friday raised its takeover bid for Internet giant Yahoo! by an undisclosed amount, at which time the two companies actively began discussing a merger. Sources close to the negotiations say, however, that the chances of the two companies coming to agreeable terms are still "50-50."

While the amount of Microsoft's new bid is current unknown, it is most certainly higher than $33 a share, the worth of Microsoft's original bid, and at or below $37 a share, the price Yahoo! was reportedly seeking. According to reports, Microsoft's new offer came on Friday, while Yahoo!'s board was meeting to discuss the company's future.

Since first announcing its intention to purchase Yahoo! earlier this year, Microsoft and its CEO, Steve Ballmer, have engaged in a number of tactics to try and bring Yahoo! to the table. Regardless, Yahoo! has repeatedly rebuked Microsoft's overtures, always because of a basic disagreement over Yahoo!'s worth. In a meeting late this past week with Microsoft employees, many of whom disagree with the wisdom of the company's pursuit of Yahoo!, Ballmer said that he knew "exactly what Yahoo! is worth [and] won't go a dime above [that price] to get the deal done."

Ultimately, however, any Microsoft-Yahoo! merger will need to involve more than just the right price: It will have to be done in a friendly, rather than hostile, fashion. During the past few months, Yahoo! has enacted policies to discourage a hostile takeover of the company, and Microsoft has feared that acting too aggressively would cause key Yahoo! employees to flee the company.

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