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Report: Yahoo to reject Microsoft bid

The Net giant's board has decided to formally reject Redmond's offer, The Wall Street Journal says. Move could be an effort to get Microsoft to substantially hike its offer.

Yahoo's board has decided Microsoft's $31-per-share offer "massively undervalues" the company, according to a report in The Wall Street Journal. Yahoo is expected to formally reject Microsoft's offer, the Journal reported.

In the report, it appears Yahoo is floating the idea that it might consider an offer of at least $40 a share. I'm not in the boardroom, but all of this--the leak, the wording--sounds like more of a negotiating tactic than a final rejection.

But, if Yahoo does want to play hardball, it has bolstered its position. The report says that Yahoo has also adopted a so-called poison pill that means that the Internet company could force Microsoft into a proxy fight to replace the board before getting Yahoo shareholders to vote on its existing offer.

The Journal says that Yahoo will outline its position in a letter to Microsoft's board on Monday.

Update 11:00 a.m. PT: Representatives from Yahoo and Microsoft on Saturday declined to comment on the report.

CNET's Elinor Mills contributed to this report.