The offer, which Kevin Johnson, president of Microsoft's platforms and services group disclosed to Microsoft employees last week, included $1bn (£500m) for Yahoo's search assets and would have helped create a long-term search partnership between the two tech companies.
"Taken together, we believe that our proposal would have created total value for Yahoo's shareholders in excess of $33 (£16.5) per share," he said.
Yahoo has since concluded negotiations with Microsoft and has announced it will start carrying advertising from Google alongside its search results. Yahoo said it expects the Google deal to generate an annual revenue opportunity of $800m (£400m).
Johnson's comments mark the software maker's first public discussion regarding the agreement between Yahoo and Google. That deal "would start to consolidate over 90 percent of the paid search advertising market in Google's hands," Johnson added. "This will make the market far less competitive."
He also hinted at potential difficulties the arrangement may face. "There are many experts who suggest that a host of legal and regulatory problems lie ahead for Google and Yahoo.”
Yahoo and Google have said they don't believe the deal needs regulatory approval, although they have submitted it 'voluntarily' for review by the US Department of Justice anyway. In a blog, Google said the deal would be "good for competition".
Others have also expressed concern about how the deal might only strengthen Google's already dominant position in search advertising. US Senator Herb Kohl, who is chairman of the US Senate Antitrust Subcommittee, said he would examine the competitive and privacy implications of the deal.
"This collaboration between two technology giants and direct competitors for internet advertising and search services raises important competition concerns."
In the meantime, Microsoft plans to continue to execute on its stated plan to boost its search and online advertising position including through internal development, Johnson said.
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