Yahoo deal falls apart
By Erina Lin, Monday 5 May 2008 at 23:14 :: Media Ownership :: #1615 :: rss
Microsoft Corp. on Saturday withdraw its US$42 billion takeover offer for Yahoo!, after the companies failed to agree on how much the Internet firm was worth, the Los Angeles Times reported.
The unexpected breakdown came shortly after their chief executives met in Seattle one day earlier. The companies had finally engaged in talks since Microsoft said it would raise billions more for the deal in January.
"We believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," Microsoft Chief Executive Steve Ballmer said in a statement.
Microsoft said it had remained determined to make the company a major force in online advertising through internal development and other alliances or acquisitions.
The software behemoth has pursued Yahoo for more than a year in order to vie against Google in the booming Web advertising market. However, Yahoo's founders said they wanted to soldier on as an independent company.
According to the Los Angeles Times article posted on MediaInfoCenter, Yahoo plans to pursue an advertising partnership with Google. Though antitrust regulators expressed concerns, Yahoo and Google were buoyed by the results of a two-week test in which Google placed its search-related ads alongside some of Yahoo's Web search results.
Google could not be reached for comment. Yahoo, on the other hand, showed no regret about not joining Microsoft in a statement issued Saturday night, the Los Angeles Times reported.
"This process has underscored our unique and valuable strategic position," said Jerry Yang. "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."
However, analysts said the withdrawal didn't end all possibility that the two companies could marry - Microsoft might be hoping that Yahoo's stock drops enough that it comes back to the bargaining table willing to sell for less.
Yahoo’s price on Monday dropped 14.5 percent to near $24.5 per share, outperforming analysts’ predictions. According to PaidContent, it seems that the market doesn’t believe it’s over. Citi’s software analyst Brent Thill puts a 15 percent likelihood on what he calls the “7 percent solution,” that at the midpoint of their demands, Microsoft and Yahoo were only 7 percent apart.
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