Microsoft Sends Letter to Yahoo! Board of Directors

Microsoft Sends Letter to Yahoo! Board of


REDMOND, Wash. — April 5, 2008 — Microsoft Corp. (NASDAQ:
MSFT) today sent the following letter to the Yahoo! Inc. (NASDAQ:
YHOO) Board of Directors:


April 5, 2008
Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089


Dear Members of the Board:

It has now been more than two months since we made our proposal
to acquire Yahoo! at a 62% premium to its closing price on January
31, 2008, the day prior to our announcement. Our goal in making such
a generous offer was to create the basis for a speedy and ultimately
friendly transaction. Despite this, the pace of the last two months
has been anything but speedy.

While there has been some limited interaction between management
of our two companies, there has been no meaningful negotiation to
conclude an agreement. We understand that you have been meeting to
consider and assess your alternatives, including alternative
transactions with others in the industry, but we’ve seen no
indication that you have authorized Yahoo! management to negotiate
with Microsoft. This is despite the fact that our proposal is the
only alternative put forward that offers your shareholders full and
fair value for their shares, gives every shareholder a vote on the
future of the company, and enhances choice for content creators,
advertisers, and consumers.

During these two months of inactivity, the Internet has continued
to march on, while the public equity markets and overall economic
conditions have weakened considerably, both in general and for other
Internet-focused companies in particular. At the same time, public
indicators suggest that Yahoo!’s search and page view shares have
declined. Finally, you have adopted new plans at the company that
have made any change of control more costly.

By any fair measure, the large premium we offered in January is
even more significant today. We believe that the majority of your
shareholders share this assessment, even after reviewing your public
disclosures relating to your future prospects.

Given these developments, we believe now is the time for our
respective companies to authorize teams to sit down and negotiate a
definitive agreement on a combination of our companies that will
deliver superior value to our respective shareholders, creating a
more efficient and competitive company that will provide greater
value and service to our customers. If we have not concluded an
agreement within the next three weeks, we will be compelled to take
our case directly to your shareholders, including the initiation of
a proxy contest to elect an alternative slate of directors for the
Yahoo! board. The substantial premium reflected in our initial
proposal anticipated a friendly transaction with you. If we are
forced to take an offer directly to your shareholders, that action
will have an undesirable impact on the value of your company from
our perspective which will be reflected in the terms of our

It is unfortunate that by choosing not to enter into substantive
negotiations with us, you have failed to give due consideration to a
transaction that has tremendous benefits for Yahoo!’s shareholders
and employees. We think it is critically important not to let this
window of opportunity pass.



Steven A. Ballmer
Chief Executive Officer
Microsoft Corp.

About Microsoft

Founded in 1975, Microsoft (NASDAQ: MSFT) is the worldwide leader
in software, services and solutions that help people and businesses
realize their full potential.

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