Microsoft looks at its Yahoo bid

SEATTLE - A person familiar with Microsoft's bid for Yahoo says the software company is evaluating its offer in light of the economic climate and the Internet pioneer's deteriorating business.

The person, who asked not to be named because he was not authorized to speak publicly, said Yahoo's share of the search market, stock price and overall condition have deteriorated since Microsoft announced its bid Feb. 1. At the time, Microsoft offered $44.6 billion. That's 62 percent above Yahoo's market value.

Yahoo's board has formally rejected Microsoft's bid, saying it undervalues the company.

Yesterday, the person familiar with Microsoft's thinking said the company has been patient - but will be so only to a point.

Shares of Yahoo fell nearly 4 percent in after-hours trading.

The possibility of a lower bid may step up pressure on Yahoo chief executive officer Jerry Yang, who had sought an alternative offer to Microsoft's that would appeal to shareholders. Since then, Federal Reserve Chairman Ben Bernanke has said the United States may be in a recession after losses tied to the collapse of the subprime-mortgage market.

"They are probably realizing that by the time the fight is over, Yahoo's value will have decreased a bit in the current macro environment," said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York.

Tracy Schmaler, a Yahoo spokeswoman, declined to comment. Calls left for Microsoft representatives seeking comment weren't immediately returned.

Yahoo fell $1.10, or 3.9 percent, to $27.26 in late trading after closing at $28.36 on the Nasdaq Stock Market. The stock had dropped 5.1 percent since Yahoo rejected the offer Feb. 11.

A combination of the two companies would unite the second and third most popular U.S. Internet search engines, and help them compete with Google Inc., which dominates the market. Yahoo, also the most-visited U.S. Web site, may help Microsoft attract back advertising sales from Google, based in Mountain View, Calif.