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2/19/2008
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Gates Calls Microsoft's Yahoo Bid 'A Fair Offer'

Gates thinks Microsoft can make progress in the online market "with or without Yahoo."

Implying that Microsoft isn't about to raise its bid to buy Yahoo anytime soon, Bill Gates told news agencies on Monday that he thinks his company's current proposal -- now valued at about $42 billion -- is "a fair offer."

"We sent them a letter and we think that's a fair offer," Gates, currently Microsoft's chairman and largest stockholder, told The Associated Press.

Gates also said that Microsoft's online ambitions won't be thwarted if the deal doesn't happen. "We can afford to make big investments in the engineering and marketing that needs to get done. We will do that with or without Yahoo," Gates said in a separate interview with Reuters.

Microsoft on Feb. 1 made an unsolicited bid to acquire Yahoo for a mix of stock and cash equal to $44.6 billion. Since then, Microsoft's share price has declined roughly 12% -- meaning the offer is now worth $41.7 billion.

Yahoo's board last week formally rejected the offer, insisting in a statement that it "substantially undervalues" the company. The board said it would evaluate other "strategic options" for Yahoo, the No. 2 player behind Google in the online search and advertising markets.

In recent days, Yahoo has been linked in reports to a list of potential partners that includes AOL, Rupert Murdoch's News Corp., and even Google.

Yahoo's rebuff has led to speculation that Microsoft would raise its initial offer in order to gain control of the company, given that Microsoft's previous efforts to boost its footprint in online search and advertising, including last year's $6 billion acquisition of aQuantive, have resulted in only modest success.

Microsoft remains a distant third in online business.

Still, there are limits to how far even cash-rich Microsoft would be willing to go to get Yahoo. Company CFO Chris Liddell recently told analysts that the company would for the first time need to borrow money in order to finance the proposed deal.

That fact, combined with Gates' comments Monday, indicate that Yahoo shareholders may have already seen Microsoft's best offer -- or something close to it.

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