Microsoft Corp says "unfortunate"

The software giant, however, said the development does not change the firm's belief in the merits of its proposal.

Microsoft Corp said on Monday that Yahoo Inc's rejection of its initial offer to buy the company was "unfortunate," but it does not change its belief in the merits of its proposal.

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"As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal," Microsoft said in a statement without specifying what its next course of action would be.

In response to Microsoft's statement, a Yahoo spokesman said it stood by its earlier letter on Monday from the Sunnyvale, California company's board that the Microsoft proposal undervalues Yahoo.