http://www.nytimes.com/2008/04/07/technology/07soft.html?fta=y

In its recent attempt to takeover Yahoo, Microsoft has just lowered its buyout offer from a value of $31 a share to a value of $29 a share, due to a drop in the price of Microsoft’s own shares. Yahoo, again, rejected Microsoft’s bid because shareholders believe that Microsoft’s offer undervalues Yahoo. Essentially, Microsoft and Yahoo are engaging in a network exchange, where both companies have incentive to make a deal.
We have discussed the basics of network exchange in class and identified positions of power within a relationship. If Yahoo has the option to exchange with several companies, then Microsoft would have to make the best offer in order to exchange with Yahoo, which excludes all other companies from making a deal. “For its part, Microsoft has insisted it sees no reason to raise its bid, because Yahoo, which has discussed alternative deals with other companies, has no competing offers,” reports New York Times writer Miguel Helft. Yahoo rejected Microsoft’s bid, despite the fact that Microsoft made the best offer. “Still, some experts in mergers and acquisitions say that without an alternative, Yahoo shareholders are likely to vote in favor of a Microsoft offer, even if it is lower,” adds Helft. Microsoft and Yahoo have yet to reach a negotiated deal, and the outcome of this network exchange will be determined in the next few weeks.