Yahoo has responded to Microsoft's attempts to up the stakes on its hostile takeover bid, saying that the proposed $44.6bn (£22.4bn) offer is still too low.

In a letter last Saturday, Microsoft's chief executive Steve Ballmer warned Yahoo's board of directors that it would attempt to stage a shareholder coup if the search firm refuses to accept the original $31 (£15.6) per share bid.

But today two of Yahoo's top directors issued a written reply, albeit one that leaves open the door to negotiation.

"We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders," wrote chief excutive Jerry Yang and board chairman Roy Bostock.
"Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo. Furthermore, as a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal."

The letter added that Yahoo remains open to any future proposals from Microsoft and other interested parties, but only if the price is right.

"We are steadfast in our commitment to choosing a path that maximises stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value," said the search firm.