Microsoft drops bid after Yahoo rejects higher offer
SAN FRANCISCO -- Microsoft (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=MSFT) dropped its blockbuster bid to acquire Yahoo (http://stocks.usatoday.com/custom/usatoday-com/html-quote.asp?symb=YHOO) late Saturday, after the two tech titans could not agree on a price.
The software giant withdrew its offer just hours after it sweetened the bid to $33 per share, or about $47.5 billion, at a meeting in Seattle between Microsoft CEO Steve Ballmer and Yahoo CEO Jerry Yang, said a person with knowledge of the talks. Yang had insisted on $37 per share, the source said.
Microsoft's decision to walk away culminated a whirlwind, three-month courtship that it initiated on Jan. 31 with a $31-per-share unsolicited bid in an effort to compete more effectively with Google for online advertising revenue and Web searches.
Yahoo repeatedly rejected Microsoft's offer, saying it undervalued the company. Microsoft at times vowed to lower its bid and threatened to launch a bloody proxy fight to oust Yahoo's 10-member board — including Yang — if Yahoo didn't accept the offer by April 26. Yahoo ignored the deadline.
Yet in a letter to Yang that Microsoft released Saturday, Ballmer said it did not make sense for Microsoft to pursue a proxy fight, which could take months. "Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition for Microsoft," Ballmer wrote.
Ballmer said Microsoft would continue to pursue other online efforts on its own.
In a statement Saturday night, Yang said with the "distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history."
Microsoft's withdrawal was as abrupt as its audacious takeover bid, which was made public Feb. 1. Its hasty retreat could have long-lasting implications for Ballmer — who has been questioned by some investors and analysts for attempting such a landscape-shifting deal — and Yang, who is trying to right Yahoo after a rough financial patch the past few years.
The breakdown in the talks is likely to send Yahoo's shares reeling and intensify anxiety among investors about Yahoo's management, which has been criticized for moving indecisively as it struggles to compete with Google.
Should Yahoo's stock take a beating it is not out of the question for Microsoft to take another crack at acquiring Yahoo — perhaps with a lower bid, says Roger Kay, president of Endpoint Technology Associates.
Yahoo has aggressively explored alternatives to Microsoft's bid, including a search advertising partnership with Google. It also explored a merger with Time Warner's AOL.
In a meeting with employees on Thursday, Ballmer said acquiring Yahoo was just one of many options in Microsoft's strategy to compete with Google. If neither a friendly nor hostile deal "look good," he said, he would be willing to scotch the bid.