Microsoft and Yahoo: No Deal

Microsoft's bid to buy Yahoo! is off the table-at least for now.

"Clearly, a deal is not to be." The penultimate line of Microsoft CEO Steve Ballmer's May 3 letter to Yahoo! Inc. CEO Jerry Yang said it all: Microsoft was abandoning its high-profile effort to acquire the Sunnyvale, Calif.-based Internet-services pioneer.

But Microsoft didn't back off without taking a shot at Yahoo!'s leadership, which rejected even Microsoft's ultimate offer of nearly $50 billion as too low. "By failing to reach an agreement with us, you and your stockholders have left significant value on the table," Ballmer wrote in the public letter formally withdrawing Microsoft's bid.

Yahoo! defended its decision to hold off Redmond's takeover attempt, which began on Feb. 1, when Microsoft announced an unsolicited offer of $31 per share, or about $44.6 billion. Yahoo! rejected that offer, holding firm even after Microsoft raised its bid to $33 per share, or nearly $50 billion. "From the beginning of this process, [we] have been steadfast in our belief that Microsoft's offer undervalued the company," Yahoo! said in a statement after the deal fell through.

At press time, the story clearly wasn't over. Analysts said disgruntled shareholders were already pressuring Yang's team to justify losing the Microsoft offer, and to start turning things around fast.

Meanwhile, Yang insisted that Yahoo! will listen to suitors whose offers don't "undervalue" the company. While some analysts predicted that Yahoo! shareholder anger might prompt Microsoft to try again, others said Ballmer was unlikely to return to the table.

Microsoft officials expressed disappointment, but emphasized that they're seeking other venues for expanding online services. "Certainly, Yahoo! would have been an accelerator, but we've withdrawn the offer, moved on and now we're focused on how to grow as fast as possible organically," Brian Hall, general manager of the Windows Live Business Group, told the audience at a Merrill Lynch conference days after the decision.


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