Microsoft says made fair offer to Yahoo

Yahoo's Jerry Yang and Microsoft's Bill Gates (R) in a combination image. Yahoo may have played its top two cards by pulling out possible deals with AOL and Google, but it does not seem to have changed Wall Street's view that Microsoft will eventually win the takeover battle.

MUMBAI (Reuters) - Microsoft Corp believes it has made a fair offer to acquire Yahoo and is committed to bolstering its digital advertising capabilities irrespective of the outcome, its chief operating officer said.

"We believe we've made a very fair offer to Yahoo's board of directors," Kevin Turner said at a news conference in Mumbai to launch strategic initiatives with India's HCL Infosystems Ltd.

"Currently, it's in their hands to decide the outcome of that offer," he said.

Microsoft had threatened on Saturday to launch a hostile bid for Yahoo and could lower its offer of $42.4 billion in about three weeks if it does not get a deal, which Yahoo argues is worth more than Microsoft's bid.

The New York Times reported this week News Corp was in talks to join Microsoft's bid for the Web pioneer.

The offer for Yahoo was in line with Microsoft's aim to enhance its digital advertising capabilities, Turner said.

"We will continue to drive marketshare from a search standpoint within the consumer space, and that's a strategy we're committed to in the long term," he said.

The offer for Yahoo was "a tactic and a strategy" toward that goal, Turner said.

"The rest is now up to their board ... With or without the acquisition we are committed to becoming a world class digital advertising company."

Yahoo announced on Wednesday a test to outsource Web search advertising to Google Inc, which sources say is part of a three-way alliance that would combine Yahoo with Time Warner Inc's AOL instead of Microsoft.

But a joint Microsoft-News Corp bid would create a more formidable competitor to Google by bringing together three of the biggest Web site publishers: Yahoo, Microsoft's MSN and News Corp's MySpace social network.

Any of the potential mergers would fundamentally change business on the Web as growth slows dramatically after a decade of explosive growth.

(Reporting by Rina Chandran; Editing by Ranjit Gangadharan)