Microsoft Says It Won't Uproot Yahoo

Microsoft Corp. said Friday it won't totally uproot Yahoo Inc. from its Sunnyvale, Calif. headquarters if it succeeds in its bid to buy the Web portal company.

"In bringing the companies together, we would be committed to maintaining Yahoo's significant presence in Silicon Valley," wrote Kevin Johnson, president of Microsoft's platforms and services division, in an e-mail to employees. Johnson noted that Microsoft employs 1,800 people in nearby Mountain View.

The e-mail was written in question-and-answer format to address recent issues raised by employees. But Johnson did not directly answer questions about staffing and layoffs.

"While some overlap is expected in any combination of this size, we should remember that Microsoft is a growth company that has hired over 20,000 people since 2005, and we would look to place talented employees throughout the company as a whole," he wrote.

Johnson's comments seem aimed at responding to Yahoo's decision to adopt new severance plans earlier in the week. All the company's full-time workers who lose their jobs without "cause" or quit "for good reason" after a Microsoft takeover would continue to receive salary and health insurance for four to 24 months, plus other benefits.

The company did not give details about its definition of "good reason," but observers noted that it could include relocation to Microsoft's Redmond headquarters.

RBC Capital Markets analyst Jordan Rohan wrote in a note to investors that that Yahoo's new plans could cost Microsoft as much as $500 million, on top of the $40 billion or so its offer to buy the Web portal business is now worth.

In the e-mail, Johnson also told Microsoft's employees that they must "not speculate with Yahoo employees about the proposal or about what a deal would mean for the combined company."

"No Microsoft employee should reach out to Yahoo employees for the purpose of integration planning unless specifically instructed to do so," he wrote.

The software maker's shares dropped 42 cents to close at $27.68 Friday, while Yahoo's stock ended the session unchanged at $28.42.