Microsoft, Yahoo meet to discuss merger?

Sources close to Reuters say executives from Microsoft and Yahoo met secretly to discuss Microsoft’s takeover bid of Yahoo. Yahoo previously rejected Microsoft’s offer, so if true, the meeting suggests Yahoo might be reconsidering.

Yahoo rejected a previous unsolicited takeover offer from Microsoft saying the bid was too low. Yahoo then began talking to other various companies about possible takeover including News Corp. and Time Warner’s America Online, but nothing came out of those discussions. Reports indicate Microsoft has been slowly working behind the scenes with Yahoo’s shareholders, trying to convince them that Microsoft's offer is good for the company. Yahoo and Microsoft met this week and senior executives from both sides seem to have been present for this meeting. The meeting was not a negotiation and there were no bankers present according to sources close to the Wall Street Journal (WSJ). Reports indicate Microsoft executives discussed their offer and presented their vision of a combined company to Yahoo executives. No financial terms were discussed and the WSJ didn’t report which executives took part in this meeting. Microsoft and Yahoo spokespeople declined to comment. As Reuters reports:

The meeting with Microsoft is part of the company’s strategy to keep all its options open, people familiar with the matter said.

Yahoo extended the deadline for nominations to its board of directors to postpone a potential hostile takeover by Microsoft according to financial analysts. Microsoft originally proposed to buy Yahoo for $45 billion based on the share value a month ago. Since then, its shares have declined by 12 percent making this takeover offer drop to $42 billion. News Corp. CEO Rupert Murdoch said his company doesn’t want to compete against Microsoft because Microsoft has more money than his company. Also, AOL bought the social networking Bebo for $850 million yesterday implying it may not be interested in buying Yahoo. As news continues to unfold, it looks more like Yahoo could end up becoming a Microsoft company. This will be great for Microsoft but many users of Yahoo properties like Flickr.com, Yahoo mail, MyBlogLog and others are not thrilled about the idea of being controlled by Microsoft. What do you think of this merger -- is it good for Yahoo?