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.”

“Yahoo! has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo! at this time. Yahoo! and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo!, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo!’s Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value.”

“We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” said Steve Ballmer, chief executive officer of Microsoft. “We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.”

“Our lives, our businesses, and even our society have been progressively transformed by the Web, and Yahoo! has played a pioneering role by building compelling, high-scale services and infrastructure,” said Ray Ozzie, chief software architect at Microsoft. “The combination of these two great teams would enable us to jointly deliver a broad range of new experiences to our customers that neither of us would have achieved on our own.”

The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners.

“The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs,” said Kevin Johnson, president of the Platforms & Services Division of Microsoft. “The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers.”

The combination will create a more efficient company with synergies in four areas: scale economics driven by audience critical mass and increased value for advertisers; combined engineering talent to accelerate innovation; operational efficiencies through elimination of redundant cost; and the ability to innovate in emerging user experiences such as video and mobile. Microsoft believes these four areas will generate at least $1 billion in annual synergy for the combined entity.

Microsoft has developed a plan and process that will include the employees of both companies to focus on the integration of the combined business. Microsoft intends to offer significant retention packages to Yahoo! engineers, key leaders and employees across all disciplines.

Microsoft believes this proposed combination would receive all necessary regulatory approvals and expects that the proposed transaction would be completed in the second half of calendar year 2008.

Microsoft is also committed to working closely with Yahoo! management and its Board of Directors as they, along with Yahoo! shareholders, evaluate this compelling proposal.

“Relevant and targeted digital advertising is important to our business and to the quality of the experience that we deliver to our users,” said Gordon McLeod, president of The Wall Street Journal Digital Network. “Microsoft’s state-of-the-art advertising platform will enable us to dramatically improve our revenues from this key sector, and we look forward to working together.”

“This deal is a significant win for Microsoft for two key reasons. First, it makes the extended Microsoft advertising network the premier destination for advertisers interested in reaching financially minded users, as it complements our offering in this vertical through MSN Money and other syndication partners,” said Brian McAndrews, senior vice president, Advertiser and Publisher Solutions at Microsoft. “Second, this deal is a strong indicator that we’re gaining significant traction with our advertising platform. The Wall Street Journal Digital Network is one of the largest financial services publishers in a very dynamic vertical segment, and we’re delighted to add it to our portfolio.”

The addition of these sites brings an additional 20 million unique visitors per month to the extended Microsoft network, enabling advertisers to reach out to an increasingly deep and attractive audience in the financial services vertical. The Wall Street Journal Digital Network is expected to begin providing Microsoft contextual advertising in February.

“Enterprise search is becoming an indispensable tool to businesses of all sizes, helping people find, use and share critical business information quickly,” said Jeff Raikes, president of the Microsoft Business Division. “Until now organizations have been forced to choose between powerful, high-end search technologies or more mainstream, infrastructure solutions. The combination of Microsoft and FAST gives customers a new choice: a single vendor with solutions that span the full range of customer needs.”

The companies possess a number of complementary strengths that advance a shared vision for helping businesses deliver information worker productivity and improved business results. FAST has a deep talent pool and is respected throughout the technology industry for its expertise in best-in-class, high-end search solutions. Microsoft offers worldwide customer reach and an extensive partner network, and is the recognized leader in business productivity with the popular Microsoft Office SharePoint Server, which combines search with best-in-class collaboration, business intelligence, portal and content management capabilities.

“This acquisition gives FAST an exciting way to spread our cutting-edge search technologies and innovations to more and more organizations across the world,” said John Lervik, CEO of FAST. “By joining Microsoft, we can benefit from the momentum behind the SharePoint business productivity platform to really empower a broader set of users through Microsoft’s strong sales and marketing network. It validates FAST’s momentum and leadership in enterprise search.”

In addition to bolstering Microsoft’s enterprise search efforts, this acquisition increases Microsoft’s research and development presence in Europe, complementing existing research teams in Cambridge, England, and Copenhagen, Denmark, with new and significant capabilities in Norway.

 The offer will be subject to customary terms and conditions, including receipt of acceptances representing more than 90 percent of FAST shares and voting power on a fully diluted basis, and receipt of all necessary regulatory approvals on terms acceptable to Microsoft. The complete details of the offer, including all terms and conditions, will be contained in the offer document, which is expected to be sent to FAST shareholders during the week of Jan. 14, 2008. The offer will not be made in any jurisdiction in which the making of the offer would not be in compliance with the laws of such jurisdiction.

“The addition of Multimap enhances Microsoft’s position as a leading provider of mapping and location platform services,” said Sharon Baylay, general manager of the Online Services Group at Microsoft. “This acquisition will play a significant role in the future growth of our search business and presents a huge opportunity to expand our platform business beyond the U.K. and globally. We are thrilled to welcome Multimap onboard.”

One of the best-known online mapping companies worldwide, Multimap provides a publicly available personal mapping service at http://www.multimap.com, as well as a range of integrated business services.

“Partnering with Microsoft gives us a world of new opportunities to build our mapping services into new technologies and applications,” said Jeff Kelisky, CEO of Multimap. “As one of the world’s foremost technology brands, Microsoft is in a position to bring even more value to the Multimap service and give people everywhere new, exciting and fun ways to get from point A to point B.”

Multimap will operate as a wholly owned subsidiary of Microsoft, as part of the Virtual Earth and Search teams in the Online Services Group. The acquisition is the latest in a series of moves as Microsoft seeks to expand its online services to deliver software, services, and premium content and applications to consumers and businesses.

“We are pleased to take our Microsoft partnership to the next level,” said Owen Van Natta, Chief Revenue Officer, Facebook. “We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to nearly 50 million active users of Facebook.”

“Making this investment and expanding this partnership will position Microsoft and Facebook to better take advantage of advertising opportunities around the world, and is a great win for not only for our two companies, but also our collective users and advertisers,” said Kevin Johnson, president of the Platforms & Services Division at Microsoft. “We have partnered well over the past year and look forward to doing some exciting things together in the future. The opportunity to further collaborate as advertising partners is a big reason we have decided to take an equity stake, and is a strong statement of our confidence in the long-term economics of this partnership.”

Facebook continues to experience strong growth both in the U.S. and international markets; almost 60 percent of Facebook’s users are outside the U.S. With an average of 200,000 new users registering each day, Facebook continues to be one of the most-trafficked sites on the Internet.

On Aug. 22, 2006, the companies announced a U.S.-only strategic alliance that named Microsoft the exclusive provider of standard banner advertising on Facebook using Microsoft’s digital advertising solutions and the Microsoft^® adCenter platform. In early 2007, the terms were extended to 2011.

“Virtual Earth -3DVIA users will be able to build a world that mixes their future projects and ideas with real-life places, buildings and structures,” said Lynne Wilson, senior vice president and general manager of 3DVIA at Dassault Systèmes. “Through Microsoft’s online geographic location mapping technology and our 3-D modeling and realistic visualization know-how, we have created a new level of realism within Virtual Earth that provides an unrestricted freedom for creativity and innovation.”

Users can download Virtual Earth -3DVIA for free and immediately begin using the fun, easy-to-use and intuitive application. Virtual Earth -3DVIA allows anyone to do the following with their ideas:

• Create. With just a few clicks, users can easily design a 3-D model of their house, favorite building or any structure, then select from different visualization options, textures and colors to give their 3-D model a style of its own.
• Publish. Users can upload their 3-D models to Virtual Earth, specifying an address or neighborhood so they can experience the model within a real-life context.
• Share. Users can add their 3-D model to collections, and share it with friends and colleagues through Web communities.

“Our alliance with Dassault Systèmes, a company that has 26 years of technology experience in 3-D modeling, will help us bring a new level of realism to Virtual Earth,” said Stephen Lawler, general manager of Virtual Earth at Microsoft. “Microsoft is committed to delivering the highest-quality product for our Virtual Earth customers, and this enhancement is another step toward fulfilling that commitment.”

Virtual Earth -3DVIA is being released as a technology preview to allow community feedback before the next release of the product. More information about Virtual Earth -3DVIA is available online at http://maps.live.com/Help/en-us/VE3DVIADownload.htm.

Microsoft also announced the availability of the Live Search 411 service. Customers can gain toll-free* access by dialing (800) CALL-411 (800-225-5411) from any phone to find and connect to local businesses and other local information, such as weather updates, movie show times and airline information. People using a cell phone with Internet access can also receive links to traffic maps from Live Search 411.

“Microsoft is building on several years of innovation in imagery and 3-D visualization, adding some of the most significant innovations to driving directions technology in the last several years and expanding how our current 185 million customers can experience the improvements to the core of Live Search to include access from a wider variety of clients, platforms and devices,” said Satya Nadella, corporate vice president of the Search & Advertising Platform Group at Microsoft. “Collectively, these improvements build on the work we did in core relevance and differentiated vertical experiences, and are an important milestone in our efforts in delivering a comprehensive, innovative search offering that includes mobile, mapping, Web and local services for customers to find what they need, when they need it, on any device.”

Today’s announcement comes on the heels of the release on Sept. 26 of several new capabilities for Live Search, which included significant improvements in relevance and coverage in the core Web search service and expanded the range and depth of information available in areas where most customers were doing most of their queries — entertainment, shopping, health and local searches.

Today’s release offers these key features:

Maps and Directions

Mobile Enhancements

More information on the mobile offerings will be available at http://www.LiveSearchMobile.com and http://www.LiveSearch411.com.