Yahoo! Rejects Microsoft/Icahn Search and Restructuring Proposal

Yahoo! Suggests Microsoft Make A Proposal To Acquire Whole Company
SUNNYVALE, Calif.--(Business Wire)--
Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company,
confirmed today that it has rejected a joint proposal from Microsoft
Corporation and Carl Icahn for a complex restructuring of Yahoo! that
would include the acquisition of Yahoo!'s search business by
Microsoft.

The proposal was made on Friday evening and Yahoo! was given less
than 24 hours to accept the proposal, the fundamental terms of which
Microsoft and Mr. Icahn made clear they were unwilling to negotiate.
After reviewing the proposal with its legal and financial advisers,
Yahoo!'s Board of Directors determined that accepting the proposal is
not in the best interests of its stockholders.

The Board's rejection of the proposal was based on a number of
factors, including the following:

1. Yahoo!'s existing business plus its recently signed commercial
agreement with Google has superior financial value and less complexity
and risk than the Microsoft/Icahn proposal.

2. The Microsoft/Icahn proposal would preclude a potential sale of
all of Yahoo! for a full and fair price, including a control premium.

3. The major component of the overall value per share asserted by
Microsoft/Icahn would be in Yahoo!'s remaining non-search businesses
which would be overseen by Mr. Icahn's slate of directors, which has
virtually no working knowledge of Yahoo!'s businesses.

4. The Microsoft/Icahn proposal would require the immediate
replacement of the current Board and removal of the top management
team at Yahoo!. The Yahoo! Board believes these moves would
destabilize Yahoo! for the up to the one year it would take to gain
regulatory approval for this deal.

Roy Bostock, Chairman of Yahoo! said, "This odd and opportunistic
alliance of Microsoft and Carl Icahn has anything but the interests of
Yahoo!'s stockholders in mind. Clearly, Microsoft, having failed to
advance in search, is aligning with the short-term objectives of Mr.
Icahn to coerce Yahoo! into selling its core strategic search assets
on terms that are highly advantageous to Microsoft, but
disadvantageous to Yahoo! stockholders. Yahoo's Board of Directors
will not allow that to happen. Yahoo!'s Board remains open to any
transaction that delivers full value to our stockholders - we just do
not believe such a transaction should be dictated by Microsoft and a
single short-term investor."

Mr. Bostock continued, "After negotiating among themselves without
the involvement of Yahoo!, Carl Icahn and Microsoft presented us with
a 'take it or leave it' proposal under which we would be required to
restructure the Company, hand over to Microsoft Yahoo!'s valuable
search business and to Carl Icahn the rest of the Company, giving us
less than 24 hours to respond. It is ludicrous to think that our Board
could accept such a proposal. While this type of erratic and
unpredictable behavior is consistent with what we have come to expect
from Microsoft, we will not be bludgeoned into a transaction that is
not in the best interests of our stockholders."

Mr. Bostock also noted that Microsoft's position that it would not
deal with, or otherwise engage with, Yahoo!'s management to reach
agreement on this proposal or to implement it, is completely absurd
and irresponsible given the complexity of the deal - one that requires
the removal of half of Yahoo!'s business from Yahoo! and then the
integration of it into Microsoft.

Yahoo!'s Board points out that a transaction to acquire the whole
company would be much more straightforward and involve far less risk
than the new proposal or any similar alternative. The Board believes a
whole company transaction could be negotiated and executed prior to
August 1st. In rejecting the Microsoft/Icahn proposal, Yahoo! not only
repeated its offer to sell the entire Company to Microsoft for at
least $33 per share, but also offered to negotiate an improved search
only transaction. Microsoft rejected both offers.

Ironically, Carl Icahn, who jointly with Microsoft developed and
presented this proposal, had previously urged Yahoo! not to sell its
search business to Microsoft. Specifically, in an interview on CNBC's
Fast Money program, on June 4, 2008, Mr. Icahn said, "... it's crazy
for this company now to do this alternative deal and give the store
away, because obviously, an alternative deal is a poison pill because
once you've done an alternative deal and given the search to
Microsoft, you don't need Microsoft to buy you anymore. So, that would
be a poison pill...."

Significantly, the Board believes Microsoft and Mr. Icahn are
overstating the value their search and restructuring proposal would
deliver to Yahoo! stockholders and are substantially understating the
risks. Yahoo! noted that a transaction that would separate the
Company's search and display businesses is an undertaking of great
complexity. While the Board acknowledges that the current proposal
contains a number of improvements over Microsoft's earlier proposal,
the Yahoo! Board's conclusion that the current proposal is not in the
best interests of stockholders is based on a number of factors,
including:

-- The revenue guarantees suggested, which are conditional and
subject to reduction, are well below the search revenue that
the Company is expected to generate on its own and in
association with its announced commercial agreement with
Google. That agreement alone is estimated to generate $250 to
$450 million of incremental cash flow for the first twelve
months following implementation, while allowing Yahoo! to
remain a principal in paid search;

-- The success of the remaining Company is critically dependent
on Microsoft's ability to effectively monetize search;

-- Microsoft/Icahn's proposed Traffic Acquisition Costs rates are
below market;

-- The proposal calls for Yahoo! to sell its industry-leading
algorithmic search business and its related strategic and
valuable intellectual property portfolio for no incremental
consideration; and

-- Many of the components of the headline value that Mr. Icahn
and Microsoft put forward, such as the spin-off of the
Yahoo!'s Asian assets and the return of cash to stockholders,
are steps that could be taken by Yahoo! on its own and the
Board continues to evaluate these options.

Mr. Bostock concluded, "Microsoft and Mr. Icahn are trying to
dismantle the Company and deliver our search business to Microsoft on
terms that would be disadvantageous to Yahoo! stockholders. We are
prepared to let our stockholders, not Microsoft and Carl Icahn, decide
what is in their best interests and we look forward to the upcoming
vote."

About Yahoo! Inc.

Yahoo! Inc. is a leading global Internet brand and one of the most
trafficked Internet destinations worldwide. Yahoo! is focused on
powering its communities of users, advertisers, publishers, and
developers by creating indispensable experiences built on trust.
Yahoo! is headquartered in Sunnyvale, California.

Non-GAAP Financial Measures

This release refers to operating cash flow (operating income
before depreciation, amortization of intangible assets, and
stock-based compensation expense, or OCF), which is a non-GAAP
financial measure. The most comparable GAAP measure is income from
operations. With respect to the OCF numbers provided in this release,
the estimate of income from operations is the same as the estimated
OCF, as the Company does not expect to incur any additional
depreciation and amortization or stock-based compensation expense
related to this agreement.

Forward Looking Statements

This release (including without limitation the statements and
information in the quotations in this press release) contains
forward-looking statements that involve risks and uncertainties
concerning Yahoo!'s projected financial performance as well as
Yahoo!'s strategic and operational plans. Actual results may differ
materially from those described in this release due to a number of
risks and uncertainties. The potential risks and uncertainties
include, among others, the expected benefits of the commercial
agreement with Google may not be realized, including as a result of
actions taken by United States or foreign regulatory authorities and
the response or acceptance of the agreement by publishers,
advertisers, users, and employees; the implementation and results of
Yahoo!'s ongoing strategic initiatives; the impact of organizational
changes; Yahoo!'s ability to compete with new or existing competitors;
reduction in spending by, or loss of, marketing services customers;
the demand by customers for Yahoo!'s premium services; acceptance by
users of new products and services; risks related to joint ventures
and the integration of acquisitions; risks related to Yahoo!'s
international operations; failure to manage growth and
diversification; adverse results in litigation, including intellectual
property infringement claims; Yahoo!'s ability to protect its
intellectual property and the value of its brands; dependence on key
personnel; dependence on third parties for technology, services,
content, and distribution; general economic conditions and changes in
economic conditions; potential continuing uncertainty arising in
connection with the withdrawal of Microsoft's unsolicited proposal to
acquire Yahoo! and the announced intention by a stockholder to seek
control of our Board of Directors; the possibility that Microsoft or
another person may in the future make another proposal, or take other
actions which may create uncertainty for our employees, publishers,
advertisers, and other business partners; and the possibility of
significant costs of defense, indemnification, and liability resulting
from stockholder litigation relating to the Microsoft proposal. More
information about potential factors that could affect Yahoo!'s
business and financial results is included under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Yahoo!'s Annual Report on Form
10-K for the fiscal year ended December 31, 2007, as amended, and the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2008,
which are on file with the Securities and Exchange Commission ("SEC")
and available at the SEC's website at www.sec.gov. All information in
this release is as of July 12, 2008, unless otherwise noted, and
Yahoo! does not intend, and undertakes no duty, to update or otherwise
revise the information contained in this release.

Yahoo! and the Yahoo! logos are trademarks and/or registered
trademarks of Yahoo! Inc. All other names are trademarks and/or
registered trademarks of their respective owners.

Yahoo! Inc.
Brad Williams, 408-349-7069 (Media)
bhw@yahoo-inc.com
Marta Nichols, 408-349-3527 (Investors)
mnichols@yahoo-inc.com
or
The Abernathy MacGregor Group for Yahoo! Inc.
Adam Miller, 212-371-5999 (Media)
alm@abmac.com
Winnie Lerner, 212-371-5999 (Media)
wal@abmac.com

Copyright Business Wire 2008