Microsoft has pledged to continue its takeover bid for Yahoo, calling the Internet firm's rejection of the $44 billion offer "unfortunate", but the software giant did not signal what steps it would take to pursue the deal.
In a statement, the world's largest software company said it would "pursue all necessary steps" to get the proposal in front of Yahoo shareholders and "consummate a transaction".
"We are offering shareholders superior value and the opportunity to participate in the upside of the combined company," Microsoft said in its statement. "The combination offers an exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."
Microsoft declined to state whether it would change the financial terms of its bid, which calls for Yahoo shareholders to get $31 per share, half in stock and half in cash.
Earlier on Monday, Yahoo rejected the takeover bid by Microsoft, arguing that it "substantially undervalues" the Internet company and was not in the interests of its shareholders.
Microsoft's original offer of $31 per share represented a premium of 62 per cent over Yahoo's market valuation. The official rejection came amid company leaks that said Yahoo would not even start negotiating with Microsoft unless the bid was raised to at least $40 per share, for a deal value of more than $50 billion.
Yahoo made the decision to rebuff the offer at a special board meeting held on Friday. The company said its board of directors was evaluating all of its future options, which media reports said could include a merger with Internet service AOL.
"After a careful evaluation, the board has unanimously concluded that the proposal is not in the best interests of Yahoo and our stockholders," Yahoo founder and Chief Executive Officer Jerry Yang said in a company-wide email on Monday.
"Of course, the board of directors is continuously evaluating all of its strategic options in the context of the rapidly evolving industry environment, and we remain committed to pursuing initiatives that maximise value for stockholders."
The takeover offer came as Yahoo's slowing rate of growth drove the company's stock price to a five-year low, and Yahoo last month said it was cutting some 1,000 jobs. Yang said that the company's strategy to reverse the decline is set to kick into high gear.
"We are putting in place the pieces we need to accelerate growth by becoming a leading starting point for users and the must-buy for advertisers," said Yang, citing among other factors Yahoo's global brand strength, investment in new advertising technologies and leading position in mobile-phone websites.