Yahoo Looks at New Way to Survive

As it scrambles to avoid defeat in its battle with Microsoft, Yahoo may try to put a little more time on the clock.

Microsoft, whose offer for Yahoo is now worth $41.2 billion, was preparing to escalate its takeover fight by starting a proxy contest next week. But in an effort to delay that move, Yahoo is considering several options, including a plan to postpone its annual meeting, people close to the company said on Tuesday.

The maneuver comes as Yahoo has stepped up merger and joint venture talks with AOL, a unit of Time Warner, these people said.

Microsoft had been preparing to nominate a slate of directors to the board of Yahoo by next Thursday, the deadline for mounting a proxy contest. If Yahoo moves back that deadline back or postpones its meeting, something it could announce as early as this week, the company could buy time to seek out and evaluating alternatives.

Under the laws of Delaware, where Yahoo is incorporated, a public company cannot go more than 13 months without holding an annual meeting. Yahoo held its annual meeting last year on June 12, and has not yet set a date for this year’s meeting.

The delay could leave room for Microsoft to reach a negotiated, friendly deal with Yahoo, which would be made much more difficult if Microsoft decided it needed to pursue the proxy contest. On the other hand, Yahoo’s continued maneuvering might just harden Microsoft’s resolve.

Yahoo’s investors could take the view that by postponing the meeting the company is disenfranchising its shareholders. The move could lead to lawsuits from Microsoft or from Yahoo shareholders.

“The most likely scenario probably is that Yahoo is trying to buy more time,” said Carl W. Tobias, a law professor at the University of Richmond in Virginia.

The additional time could give Yahoo a chance to find other partners or try to persuade Microsoft to raise its offer before the fight between the two companies escalates further, Mr. Tobias said.

This delay tactic was used in a major takeover battle in Silicon Valley, when BEA Systems postponed its shareholder meeting in the face of Oracle’s bid. Less than a month after it announced the delay last December, BEA agreed to be acquired by Oracle.

Spokesmen for Yahoo and Microsoft declined to comment.

Meanwhile, Yahoo, which has been canvassing for other possible suitors and has held talks with the News Corporation and Google, appears to be focused on a possible transaction with AOL, people involved in the talks said.

It is unclear what shape a deal could take. AOL is far too small to buy Yahoo, but a joint venture or merger of the two properties — which would combine AOL’s strong position in the display advertising market and Yahoo’s display and search advertising business — could be seen as an alternative to a sale to Microsoft.

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A deal between Yahoo and AOL is being supported by Google, which has a 5 percent stake in AOL, these people said.

Most analysts believe it is unlikely that a combination with AOL or the News Corporation, or a business deal with Google, would persuade Yahoo shareholders they would fare better than by taking Microsoft’s offer. The cash-and-stock bid was initially $44.6 billion but has fallen along with Microsoft’s stock.

Last week, AOL’s chief executive, Randy Falco, appeared to dismiss talk of a deal with Yahoo and seemed to be reveling in the drama. “I hope they beat each other’s brains out over search and leave the display market to us,” Mr. Falco said. “I think it’s a mistake. But I think Napoleon said never interrupt your enemy when they’re in the middle of making a mistake.”

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