The Yahoo! Inc. board of directors turned down a $44.6 billion takeover offer from Microsoft Corp. as too low, setting up a potential showdown with the software maker, Bloomberg reported.

After a 10-day review, the board concluded that the $31-per-share offer “substantially undervalues” the company, Sunnyvale, Calif.-based Yahoo said today in a statement. The directors didn’t make a counter-proposal.



Yahoo CEO Jerry Yang will try to convince shareholders he can win a higher bid or craft a plan to spark growth in online advertising sales. The online ad market may double by 2011, and Yahoo has lost market share to Google Inc. and social-networking sites such as News Corp.’s MySpace and Facebook Inc.

In its statement, Yahoo said it is worth more than Microsoft offered because of its recent work to boost its ad technology, future prospects and investment portfolio. The decision was unanimous and the board is “continually evaluating” options to improve the stock’s value, Yahoo said.



The rejection leaves Microsoft deciding whether to raise the price, give up or take the offer straight to shareholders. A person familiar with the matter said last week that Microsoft might seek to oust Yahoo directors should they turn down its offer.