Today Yahoo! (YHOO) to reject Microsoft (MSFT) offer as too low

Several media outlets are reporting that Yahoo! (NASDAQ: YHOO) will today reject Microsoft's (NASDAQ: MSFT) offer for the firm as being too low. According to The New York Times, "Yahoo's response is expected to reject negotiations and explain why Yahoo's board believes the current offer price is too low."

The Yahoo! board certainly has guts, but does it have brains? Based on the company's performance last year and the likelihood that it will have only a modest Q1 performance, it is hard to imagine on what basis it can make its valuation case. While the firm may hope it can get a deal with another internet firm, that is far from certain.

Microsoft has indicated that it will lower the price on the deal, but that may give the Yahoo! board more ammunition to make its valuation case. While the company may not be worth more than the $31 offer, a lower offer of, say, $27 might allow Yahoo! to argue that the price is, indeed, too cheap.

Yahoo!'s biggest problem now is the huge distraction that the deal makes for the company's board and senior management at a time when they cannot afford to allow any missteps in the firm's performance.

Douglas A. McIntyre is an editor at 247wallst.com.