Yahoo to turn down Microsoft bid

Yahoo is set to reject Microsoft's unsolicited bid, now worth $42bn (£22bn), as too low, a source familiar with the situation told Reuters on Saturday -- the first clear signal the board might be prepared to negotiate and sell the Internet media giant.

The Wall Street Journal had quoted an unnamed source as saying Microsoft's offer of $31 per share was an attempt to "steal" the company and that Yahoo was unlikely to consider anything under $40 per share -- double its price in January.

At $40 per share, the value of the cash and stock deal would be worth $51.1bn.

If completed, a merger of Microsoft and Yahoo would be the world's largest of two computer technology companies and create a formidable rival to Internet search and advertising leader Google.

Yahoo has been considering options, including negotiating a higher price and striking a deal with Google to take over its search operations to keep Yahoo independent, The Wall Street Journal said.

The newspaper reported that Yahoo's board met on Friday.

No alternate bidder has emerged and Wall Street has been betting that the likeliest outcome is for Yahoo's board to negotiate a higher price from Microsoft.

"Are they really seriously about nothing less than $40, or is it a negotiating tactic to try to get a richer price?" Global Crown Capital analyst Martin Pyykkonen said.

"To me, it sounds like a counter-negotiation tactic. Maybe they'll end up settling for $35, $36 or $37 a share," Pyykkonen added.

Last Monday, Citigroup analysts spelled out various scenarios, including Yahoo seeking a higher bid, finding another bidder, seeing the deal derailed by regulators or striking a partnership with Google.