As previously rumored, Yahoo Inc. has officially rejected the buyout offer from Microsoft. The Wall Street Journal previously reported that the company officials want at least $40 per share, which means around $12 billion more than the $44.6 billion, or $31 per share, offer.

"After careful evaluation, the board believes that Microsoft’s proposal substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments," Yahoo said in an official statement.

Yahoo was advised by Goldman, Sachs & Co., Lehman Brothers and Moelis & Company on the Microsoft deal.

Yahoo may be evaluating the possibility to re-start merger negotiations with AOL, which is owned by Time Warner. Previous talks between Yahoo and AOL have failed due to economic reasons, but at times like this, any option seems to be better than the $45 billion offered by Microsoft.

"All they [Microsoft] are trying to do is pick off the company on the cheap. They’re trying to steal it. And the board is not going to let that happen. They have gone for a valuation that reflects the five-year low of the stock," The Times quoted a source inside Yahoo before the official announcement.

The prospects for the second largest search engine on the Internet, Yahoo, are less than perfect after the company announced it would cut 1,000 jobs after the sales in the fourth quarter dropped 23 percent. The troubled Yahoo! is, however, fighting to regain its financial strength and announced it is selling its digital music subscription service, Yahoo Music Unlimited, to Rhapsody America. Rhapsody is a partnership of Real Networks and MTV Networks.

Also, Terry Semel, former CEO of Yahoo, resigned as chairman of the board. In June Semel stepped down from the position of Yahoo’s chief executive after six years at the post, and was replaced by Jerry Yang, one of the original co-founders of Yahoo. In 2006 investors lost confidence in him when Yahoo lost ground in Internet advertising to Google.

According to the company’s estimations, the net income for the last quarter ending December 31 dropped approximately 60 million dollars compared to the same period a year ago, while the operating income fell 38 percent compared to last year, to $191 million.

"The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders," Yahoo said in today's statement.