Yahoo's board of directors has rejected Microsoft's buyout offer, saying the $44.6 billion bid is too low and not in the interest of shareholders of the veteran internet company.

"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 a statement.

As a result, the board "concluded that the proposal is not in the best interests of Yahoo and our stockholders."

Meanwhile, Yahoo has reportedly restarted merger talks with AOL, in addition to evaluating tie-ups with Google or Disney.

TimesOnline reports that Yahoo and its team of advisors from Goldman Sachs and Lehman Brothers have spent the past week evaluating possible scenarios.