Despite shareholder lawsuits, Yahoo chief executive Jerry Yang says the company's board is looking out for stockholders in rejecting Microsoft's bid for the Web portal.

In a letter sent to shareholders and published by SearchEngineWatch.com, Yang reiterated the board's position that Microsoft's offer is too low and is not in stockholders' best interest.

"Most importantly, I want you to know that your board is continuously evaluating all of Yahoo's strategic options in the context of the rapidly evolving industry environment, and we remain committed to pursuing initiatives that maximize value for all our stockholders," Yang said.

The CEO went on to list the portal's strengths as the top destination for Web surfers. Yahoo in December led in number of visitors, with nearly 137 million, according to ComScore. Google sites were second with 133 million visitors and Microsoft sites were third with 120 million.

Because of its standing, Yang said, Yahoo is attractive to marketers, which have made the site No. 1 in display advertising. While the latter is true, according to ComScore, Yahoo in the fourth quarter underperformed the overall online advertising market, which resulted in its share falling 0.6% to 11.4% from the same period a year ago, according to IDC. Yahoo rival Google, on the other hand, continued to dominate the market.

Nevertheless, Yang said the company has the money to invest in its strategy for increasing its ad share in a market that's expected to grow to $75 billion in 2010 from $45 billion last year. As of Dec. 31, Yahoo had a cash balance of more than $2 billion.

"We have a huge market opportunity -- and are uniquely positioned to capitalize on it," Yang said. Recent improvements in its online ad business include the global rollout of a new search marketing system called Panama and last year's acquisition of ad exchange Right Media.

The portal's goals are to increase the number of visitors by 15% per year over the next several years, and it plans to grow its business in the emerging mobile advertising market. "We are building a superior mobile experience for Yahoo users globally so we can further capitalize on this opportunity," Yang said. In online advertising, "we are striving to increase the percentage of total online advertising demand we touch from an estimated 15% in 2007 to 20% over the next several years."

While trying to convince stockholders that Microsoft's offer is a bad one, Yang behind the scenes has been trying to avoid a takeover in negotiations with News Corp.

The two companies are discussing a plan in which the media conglomerate would take a 20% stake or more in Yahoo in exchange for News Corp.'s ownership of MySpace and several other online properties, The Wall Street Journal reported Thursday, quoting people familiar with the discussions. Yahoo also has approached Time Warner's AOL, but that option appears less likely to succeed.

While the success of those discussions is a long shot, they could add pressure on Microsoft to raise its offer. Larger holders of Yahoo stock have said that a deal is likely to be approved if the software maker sweetens the deal.

In the meantime, restless shareholders have sued Yahoo for rejecting Microsoft. The Wayne County Employees' Retirement System in Michigan, which owns 13,600 shares of Yahoo, sued the portal in Delaware Chancery Court Monday. The suit asks the court to force Yahoo to seriously review takeover offers. "Just saying no is not an appropriate response," David H. Fink, lawyer for the retirement system, told InformationWeek.

While the original cash-and-stock bid was pegged at $44.6 billion, Microsoft's offer is effectively lower based on its share price of $28.96 in 4 p.m. composite trading on the Nasdaq Wednesday. The offer is now valued at $42.1 billion, according to The Wall Street Journal.