NEW YORK - Bloomberg


Microsoft Corp. made a final proposal to Yahoo! Inc. before the Internet company forged an agreement with rival Google Inc. offering to buy $8 billion of Yahoo shares at $35 each and acquire its search-engine business.
Microsoft the world's biggest software maker would have paid $1 billion for the search unit President Kevin Johnson said Friday in an e-mail to employees. The discussions were the most recent round of talks that began with an unsolicited bid for the whole company Jan. 31.
The Microsoft proposal would have challenged Google's dominance in Internet searches by forming a long-term partnership with Yahoo according to the e-mail. The deal would generate more revenue for three years than what Yahoo gets from its own ad system Johnson said.
“This partnership would have created a stronger competitor to Google providing greater choice and innovation for advertisers publishers and consumers” Johnson said.
The company opposes Yahoo's partnership with Google the largest search engine because the deal will consolidate more than 90 percent of the market Johnson said. Yahoo will let Google run ads beside some of its search results.

Less attractive?
Yahoo turned down the Microsoft offer because it undervalued the search business and the company as a whole said a person familiar with the talks who asked not to be identified. The agreement would have locked Yahoo into an exclusive deal for 10 years while only offering higher returns for three the person said. The Google accord lets Yahoo work with other companies.
Yahoo spokeswoman Diana Wong did not immediately return a call seeking comment. Microsoft has said its offer for Yahoo's search business is still on the table and that it is no longer pursuing a aaaa acquisition of the Sunnyvale California-based company.
Its latest proposal would have added more than $1 billion to Yahoo's operating income more than doubling it in the first year of operation Microsoft said. The combination of search platforms also would have reduced engineering and development costs. The plan would transfer $9 billion in total to Yahoo Johnson said.
Microsoft had agreed to discuss an alternative transaction with Yahoo after dropping its bid of $47.5 billion or $33 a share on May 3. The company made a $31-a-share offer three months earlier touting the deal as a way for the No. 2 and No. 3 U.S. search engines to gain ground on Google. The arrangement with Google will add about $800 million a year to sales Yahoo said this week. The companies will delay implementing the program which covers search results in the U.S. and Canada for up to three and a half months to give the U.S. Justice Department time for review. The deal may add as much as $450 million in operating cash flow in the first 12 months Yahoo said. The partnership isn't exclusive meaning that other companies will be able to sell ads that appear on Yahoo's pages. Yahoo's revenue last year was $6.97 billion.