Mumbai: Internet search major Yahoo Inc has again rejected the $42 billion takeover offer by Microsoft Corporation, but said it was not against a takeover by the software major.

Responding to a three-week deadline by Microsoft Corp to accept its takeover bid, Yahoo boss Jerry Yang said ''the offer on the table is still too low.''

In an open letter to Microsoft chief executive Steve Ballmer, Yahoo said the software giant's threat of a proxy battle was counterproductive and Yahoo would only be open to a better deal.

Yahoo rejected the initial offer of $45 billion (EUR 29 million) two months ago because it substantially undervalued Yahoo. Microsoft share has since fallen, making the offer even less attractive.

Yahoo said a number of things have since happened to increase the value of its business: the presentation of a three-year financial and strategic plan, the disclosure of new offers, and the announcement of the first detailed plans on the AMP web platform.

AMP will be rolled out in late summer or autumn, making it easier for partners to more precisely target their advertising. This platform is expected to boost the lucrative online graphic advertising business in which Yahoo is market leader.

The Yahoo board remains convinced that the proposal is not in the best interests of the company or its shareholders, the letter said. Yahoo, Yang added in the letter, has been exploring alternatives to a takeover by Microsoft.

Yang said the Yahoo board had also been concerned about possible regulatory problems and had sought information from Microsoft on the possible legal ramifications of a takeover.

"Our board's view of your proposal has not changed," said the letter, signed by Yahoo chairman Roy Bostock and chief executive Jerry Yang. "We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders."

When Microsoft first announced its bid on February 1, the deal valued Yahoo at $31 per share, or $44.6 billion in total, representing a 62 per cent premium to Yahoo's market price.

But a fall in Microsoft's stock price means the proposal now values Yahoo at only $29.62 per share. Yahoo shares slipped 1.3 per cent to $27.99 in Nasdaq trading. 

Microsoft shares rose 12 cents to $29.28 on Nasdaq.

Microsoft wants to acquire Yahoo to help it break the stranglehold of rival Google in web searching and online advertising.