Microsoft withdraws its bid for Yahoo International Herald Tribune

Microsoft said Saturday that it was abandoning its blockbuster bid to acquire Yahoo after it raised its offer by billion but Yahoo rejected it as still too low. The about face followed a meeting on Saturday morning in Seattle between Microsoft s chief executive Steven Ballmer and Yahoo s chief and co founder Jerry Yang according to a person familiar with the talks. At the meeting which also included Yahoo s other founder David Filo and a Microsoft president who oversees its online unit Kevin Johnson Ballmer increased Microsoft s offer to a share or a total of about . billion from . a share. Yang told Ballmer that Yahoo would not accept an offer below a share this person said. Despite our best efforts including raising our bid by roughly billion Yahoo has not moved toward accepting our offer Ballmer said in a statement. After careful consideration we believe the economics demanded by Yahoo do not make sense for us and it is in the best interests of Microsoft stockholders empl! oyees and other stakeholders to withdraw our proposal. A person close to Yahoo said the price was not the only stumbling block. The person said Yahoo was also concerned that the deal could be blocked by regulators and wanted a higher offer in part as a hedge against that risk. Today in Technology Media Withdrawal or new ploy in the battle for Yahoo Mobile TV gathers momentum Russians learning to watch out for Web x friends x Microsoft s decision to walk away casts a cloud of uncertainty over Yahoo and its shareholders. The breakdown in the talks is likely to send Yahoo s shares plunging and Yang and his team will have to decide how to placate investors. The company has been exploring alternatives to a marriage with Microsoft including a partnership in search advertising with its arch rival Google which could lift Yahoo s profit and perhaps its stock price. Yahoo has also discussed possible mergers with the AOL unit of Time Warner and the MySpace unit of the News Corporation! . The MySpace talks have not been active of late. But both remaining options pose challenges. A Google partnership would be likely to attract scrutiny from regulators because of Google s dominance over online search and advertising while AOL and Yahoo have many overlapping businesses and technologies making a merger difficult. In a statement issued late Saturday 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. Reactions inside Yahoo are likely to be mixed. Several senior executives favored selling to Microsoft and said in recent days that they were hoping to see a deal happen. Yet other executives were high fiving each other for defeating Microsoft s bid people close to the company said. While its stock may fall on Monday Yahoo s management was encouraged by discussions with its largest investors in which they urged management to not accept a share these people said. For Yang Microsoft s withdrawal is consider! ed a personal victory according to one person who spoke with him. Microsoft has spent years and billions of dollars trying to build an online business. Yet it has steadily lost ground to Google in the search business and has failed to gain significant momentum with advertisers. Microsoft s decision to abandon its pursuit of Yahoo is not necessarily the last chapter in the three month old saga. If Yahoo s shares fall significantly the company will be under intense pressure to act and may choose to resume negotiations. Earlier this year under intense shareholder pressure BEA Systems did just that agreeing to a takeover by Oracle soon after Oracle dropped an unsolicited offer it had made for BEA. This seems like a very strong but serious negotiating tactic said Jonathan Miller the former chairman and chief executive of AOL. It will be up to Yahoo to come back to the negotiating table. Microsoft had threatened to pursue a hostile takeover if it could not come to an agreement wi! th Yahoo s management. That could have involved an appeal directly to Yahoo s shareholders and an effort to remove members of Yahoo s board of directors. In a letter to Yang sent on Saturday afternoon Ballmer wrote It is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest. He added 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 took particular aim at Yahoo s discussions of a partnership with Google noting that it would make an acquisition of Yahoo undesirable to us for a number of reasons. Next Page Back to top Home Technology Media IHT.com Home Latest News Lewis Whyld PA via The Associated Press Conservative is elected as mayor of London Boris Johnson was sworn in as mayor of London after an electoral victory that was a resounding rebuke to the Labour government of Prime Minister Gordon Brown. 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Source: http://www.iht.com/articles/2008/05/04/technology/04soft.php

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