Microsoft pulls its Yahoo offer

Update 5 p.m. PDT: Microsoft has made its move official. Click here for the story and here for the text of a letter Ballmer sent to Yang.

Microsoft is withdrawing its offer for Yahoo after talks between the two companies broke down on Saturday, a source told CNET News.com.

News.com Poll

Microhoo fallout
What's most likely to happen, now that Microsoft has abandoned its bid for Yahoo?

Google gets stronger
Yahoo's stock plummets
Microsoft tries to buy another company, like Facebook
Microsoft waits a while, then bids again for Yahoo
All of the above
None of the above

View results

Microsoft hiked its offer to $33 a share, but Yahoo was holding out for $37 a share, the source said. The two sides met face to face again Saturday, but remained far apart.

Although price was a key issue, Microsoft also had strategic concerns and saw it as unlikely to achieve a friendly integration process. According to a source close to Microsoft, Yahoo founder and CEO Jerry Yang had "unrealistic expectations."

Microsoft made its $31 a share cash and stock offer on February 1. Yahoo rejected the bid as undervaluing the company, and the two sides had only the most basic of negotiations until Microsoft set a three-week deadline last month. Negotiations heated up on Friday, but the two sides remained far apart.

The move leaves both companies in a tenuous spot. Although Microsoft has said it has a strategy to take on Google without Yahoo, Yahoo represented the biggest opportunity for Microsoft to gain scale against its rival, which has a much larger Internet advertising business.

Yahoo, meanwhile, has had talks with AOL and Google, but it is unclear whether deals with either would produce the kind of immediate return for shareholders that a Microsoft deal would offer.

Microsoft is expected to announce its move publicly shortly, according to the source.

[The_Decider]

What a shame

I was looking forward to watching go into debt and get nothing of true value for it.<br /><br />It would have been fun to watch. *sigh<br /><br />At least we still have Vista, Office 2007, and the Zune to laugh at.

[Had_to_be_said]

I cant believe how WRONG you are.

Sure, we can laugh at the Zune...<br /><br />...but, common-sense demands that we should shun, if not actually fear, Vista.<br /><br />...And, Office 2007 just isnt really that bad. Insanely overpriced, perhaps... certainly a useless upgrade... and it fills no actual need, maybe. But, as a product attempt, I think it is too sad to actually laugh at it. Hhhmmm... Come to think of it... Office 2007 kinda, also, sounds like most of Microsofts latest products, doesnt it..?<br /><br />Just, my two-cents...

[The_happy_switcher]

Well said

I would have liked seeing these two bloated behemoths get together, too, and then watch them collapse under their combined weight into a swamp of their putrid products.

[onlyauser]

110% agreed --- we lost a great show

110% agreed --- we lost a great show.<br /><br />Very sad.<br /><br />We, still have some worthy entertainment provided by Redmond. As said at least we can get our laughs at Vista, Office, OneCare and so on. And should Microsoft had successfully acquired Yahoo (bottom feeder not worth the offer) what a SOAP-OPERA that would have been.<br /><br />Very sad.

[JCPayne]

I'm going to buy Yahoo shares when they fall a bit more.

And keep them for their next merger proposal....

[alchemistmuffin]

YAY!

NOW THAT'S OVER...<br /><br />What's next for Yahoo? Buying AOL, I hope so...

[Sumatra-Bosch]

Another Victory for the Boy Fuhrer from Duncan Hines!

Brilliant, Steve, brilliant. <br /><br />First, it was an idea only you could hatch with a straight face.<br /><br />Second, it was a really stupid idea. <br /><br />Third, only one company hates MSFT more than Yahoo! and only <br />now coming to the conclusion that the company was "unlikely to <br />achieve a friendly integration process" is really a sign of early <br />onset Alzheimers. Consult with your doctor.<br /><br />Steve, hello. Clue. Yang is a Lotus guy. Remember all those <br />underhanded schemes MSFT used to kill Lotus Smart Suite, you <br />know, the ones for which MSFT had to settle with IBM some <br />years back? Think this might have influenced Yahoo!'s culture <br />and have something to do with the fact that everyone at Yahoo! <br />who can put on their socks without pictorial instruction would <br />rather go on a diet of camel smegma than work for MSFT?<br /><br />Anyway, congrats on another disaster that could not have been <br />more calamitous if you'd planned it.

[Norseman]

Mergeus interruptus

Wonder what Plan B is.

[groink_hi]

Next step...

Microsoft should invent something totally on their own for once. Innovation doesn't mean buying technologies from different place and then making them work together. That's what Microsoft would have down if they successfully purchased Yahoo! technologies.

[n3td3v]

Yahoo back to square one

Yahoo is back to square one, that means further job cuts, reduction in services, advert revenue and eventually web traffic.<br /><br />Its a sad day for Yahoo, their over inflated egos got the better of them.<br /><br />Now is Jerry Yang going to be forced out?

[Melekai]

Square one for M$ also

Let's face it M$ Doesn't create new and innovative things, (see <br />vista). Who else is there left to borg?<br />It was Balmer's greed not Yang's that started this.<br />Now we shall see Google slowly assimilate Yahoo with no <br />resistance.

[Penguinisto]

No publicity is bad publicity.

I doubt Yahoo will simply fade into the night... between being forced to show off a shedload of new profit-making moves, to getting world-wide attention? <br /><br />Nah - they were fading away before, but not now.<br /><br />/P

[YankeePoodle]

smart move

MSFT did what is in the best interest of MSFT and its share-holder.

[AppleSuxLeo]

Yahoo will tank now...

I`m glad they backed out. It wasn`t a good fit. News Corp. (MySpace) makes a lot more sense. MySpace has a gazillion built-in page views. Its all about page-views and MSpace Music will be a hot property.

[The_Decider]

LOL

And if MS was successful, you would be saying how it was a brilliant take over and will put MS is perfect position to catch up to Google.<br /><br />What would make sense for MS would be to actually produce a high quality product that people want to use.<br /><br />How did MS lose sight of that?

[loserguy3000]

Yahoo (and Jerry Yang) are heroes now!

Good for Yahoo. Friggin GOOD FOR THEM. The Microsoft Machine needs to realize that it cannot continue to buy its way to perpetual successes when others toil and slave for the next big innovation.<br /><br />Whether unreasonable or not, Yang and Company have said defiantly to Balmer and Company that they're not willing to fit the mold of a company (Microsoft) that obviously and demonstrably has no clue how to succeed in the Search Wars (as evidenced by the complete failure of Live Search). Microsoft's archaic thinking of innovation through acquisition helps nobody, and its been a pleasure to see them so openly feared throughout this process.<br /><br />GOOD for you Yahoo...stick to your guns. We all know you'd like to defeat or even compete more appropriately with Google, but it victory (or even success) won't come at the bequest of a company that only sees you as a cog in their machine. Do your own thing, get smarter...and for God's sake avoid Microsoft. You don't need them.

[YankeePoodle]

dont get emotional

Chill Out Dude...<br /><br />Yahoo wanted more money than it is worth, is it a good thing, I dont know. Did they stand-up for something? Certainly not, they just wanted more money being ego-centric that Yahoo has become, there is nothing achieved here. Yahoo's existence will depend on its performance down the road, it has not been great lately anyway.<br /><br />Just to boost their stock, yahoo will try another round of lay-offs and restructuring etc. to keep the angry shareholders away and pray something really great happens. They can do all the wheeling and dealing and ribbon-cut a whole highway of platforms, but their stock will never realistically make $36 they demanded from Microsoft, not in another 5 years.

[Commander_Spock]

"Yahoo (and Jerry Yang)"....

has lost a wonderful opportunity to show the world how good Lotus SmartSuite (remembering folks - the Spread Sheet That Revolutionized The World) really is. The missed opportunity - To Revolutionize The World - Again; in "XML" like ways!

[theantibush]

?Hes outta control...cap ?em? ? GTA, Vice City

Like I said when this all started...its a stupid move, with no plan B.<br /><br />This will be immensely damaging.<br /><br />?Developers, developers, developers?...get a clue, ballmie.<br />Devs are a dime a dozen.<br /><br />Its ?ideas, ideas, ideas? ... and other people?s ideas are whats beating the crap out of msft, not their developers. Its what their developers are doing....with ideas.<br /><br />Did you catch that?<br /><br />My plan B would be to cap ballmie, hes the GWB of msft.<br />Anybody that feels they have to reach outside msft to such an extent to be competitive, with the resources they have, and in such a damaging way, needs to go. <br /><br />Now.

[The_Decider]

Ballmers next move

Well after a month of throwing chairs has ended.<br /><br />He is going to say that they didn't want Yahoo, didn't need them and unveil a plan to unseat Google by spewing the most massive ball of buzzwords ever uttered by 1000 people until he implodes, leaving a massive crater in Redmond.<br /><br />Either that or he will continue to attempt to buy MS into further irrelevancy.

[The_Decider]

errr explodes nt

nt

[irperez]

I Predict Yahoo Shares Tank back down to $15/share...

I bet that on Monday, Yahoo shares will tank badly... Microsoft will eventually say "See, Yahoo really is not worth that price"... I see a ton of law suits from a bunch of Yahoo share holders saying Yahoo is doing the wrong things... Yahoo will not be able to "right the ship" again... and Microsoft will come back with a lower offer. <br />Boy, Yang really screwed up when he and the other co-owner gave up 51% of the shares... At least Gates did it right in that perspective...

[Commander_Spock]

Long Live the Kings - Elvis, OS/2 and now - Windows!

Yahoo tried to kill "OS/2 Groups at Yahoo" and now they are the ones that are falling into the graves that they dug for "OS/2 Groups". Read the subject line.

[ServedUp]

Microsoft is all talk..

Thats giving it back to Redmond. Way to go Yahoo!<br /><br />Yahoo doesn't even want to be taken over! The audacity of some <br />posters and bloggers who believe Microsoft would be Yahoo's <br />savior. Yahoo was solving their own problems when this whole <br />Microsoft debacle came along. They just added more problems <br />to their list! Finally at least thats over with and now Yahoo can at <br />least get back on track in repairing themselves. And the <br />industry is now safe from the clutches of a destructive company <br />hellbent on trying to worm their way in so they can monopolize, <br />reap and pillage the online search market with their strong arm <br />business tactics. It may have worked with Bungee but sorry not <br />Yahoo!

[toosday]

Yahoo Stock vs. Microsoft's Offer

I totally understand that Microsoft and Yahoo's corporate culture could clash if there were a buyout. And I understand some people on this thread (probably unjustly) siding with Yahoo. However in terms of facts:<br /><br />Microsoft was offering $31 per share.<br />Yahoo demanded more.<br />Yahoo's stock closed at $28.67 per share.<br /><br />Umm...someone on Yahoo's side sucks at math. Hope Yang can get the stock up soon or the shareholders are gonna be very angry!

[The_Decider]

Hardly

Yahoo demanded more because they knew MS would not accept it.<br /><br />Yahoo had the support of their major shareholders, which in our greed driven culture means everything.<br /><br />The deal included cash and MS stock. MS stock is stagnant. <br /><br />If this deal went through the Yahoo shareholders that stuck around would get severely hosed in the end.

[Vegaman_Dan]

Update

As of Tuesday morning, 5/6, it was trading at under $24/share. That's a $7 loss right there alone.<br /><br />How low will it go? Will it go down to pre-merger values? Probably not. I do expect it to stop around $20 though, someplace in the middle.

[Vegaman_Dan]

Yahoo was going down the drain before the offer... and now?

Facing financial burdens, lower ad revenue, loss of internal resources and employee defections, their saving grace was to be bought out by someone. Several stepped forward, but MS was the only one that was still interested as the other suitors dropped out. Now Microsoft is out and nobody is left.<br /><br />Yahoo is left without a dance partner.<br /><br />Where does this put them? They are now in worse condition than before this mess. They had companies interested in buying them before but now- nothing. Will the stock tank? Will the stockholders who were sitting pretty to make a nice healthy fat profit still be happy with the CEO when their stock drops to a fraction of its prior value, for some actually forcing them to take a loss instead of a profit? <br /><br />I can't help but think this is all a plan by Microsoft. Go in, scare off any competition, let Yahoo struggle, offer a buyout with a set price. Yahoo refuses, everyone backs out and the real value of the company drops like a rock. Wait six months for them to flounder around and the board get changed out and then go in and buy them out for a firesale bargain price.<br /><br />From a business point of view, it's brilliant. <br /><br />I'm still against a merger of the two, but I can see where this is going and it doesn't look good for Yahoo unless they can find another partner when everyone's had a chance and has backed out.

[ralfthedog]

Google partnering with Yahoo.

Google and Yahoo will be announcing a number of deals, both financial and IP licensing that will make both Yahoo and Google stronger. No stocks will change hands. Google will have no control over Yahoo.<br /><br />It would be very hard for the Trust Busters to oppose these deals. They will increase the level of competition because it will leave Yahoo independent and much stronger.

[Penguinisto]

You've got references for some of this, right?

...because before MSFT showed up, Yahoo was coming back quite nicely. Recent events have forced Yahoo to show their hand in many areas, all of which appear to be positive. <br /><br />If anything, MSFT did two things that it never intended:<br /><br />1) Put Yahoo's name in the news - everywhere. Yahoo was a fading ho-hum name... now it's on everyone's lips (again).<br /><br />2) Forced Yahoo to do more than merely placate shareholders with half-secrets and vague promises; now there are concrete plans and partnerships that have probably harmed Microsoft more than helped it... even if Microsoft never really intended to buy Yahoo in the first place.<br /><br />/P

[AppleSuxLeo]

Yahoo`s recent run-up in stock price...

was due to the fact that MSFT was SUPPOSED to buy them. Any sucker that bought Yahoo during this period of time is a sucker , and will have lost a lot of money come Monday.

[naterandrews]

Now is the time...

for all the people wanting Yahoo! to remain independent to come to their aide. Sure, it's fine and dandy to say "To hell with Microsoft, I hope the offer falls flat on it's face!!1!", but now people must help Yahoo!, which I don't see happening. Being against something and active towards a solution are two different things.

[ralfthedog]

I might spend a few dollars with Yahoo.

I don't generally spend allot of money on search phrases. My organic search results do quite well. I might send them a few bucks on one or two of my weaker words just to help out.

[Commander_Spock]

"To hell with Microsoft" (the Home of Code-Base OS/2) Heck No!

To hell with the OS/2 Group "killers"! - YES!<br /><br />Read the subject line!

[Brian]

Microsoft may target Google Next

Google is the number 1 search engine - period.<br /><br />Yahoo is number 2.<br /><br />Microsoft is number 3.<br /><br />At this stage, it is in Microsoft's logical next move to form a <br />partnership with Google.

[The_Decider]

Is it in Google's best interest?

Not likely and there are strong feelings of animosity on both sides of the aisle, to put in nicely.<br /><br />It was obvious MS could not gain anything in the search/ad arena without help. The actions of MS lately prove it. Google needs no such help.

[Vegaman_Dan]

I don't see it happening

It doesn't make logical sense to me to partner up with Google. The amount of resistance in the legal side alone would tie it up for years in the courts, negating any benefits it might have.<br /><br />Seems to me there is someone out there at #4 that is lurking and about ready to make a move that we haven't seen yet. What that move may be and with whom, I don't know, but the situation is prime for it.

[t8]

Microsoft lives another day

A pity it didn't go through. It would have been a great history lesson for not what to do.<br /><br />Anyway this whole fiasco only highlights the fact that Google is kicking Microsoft and Yahoo's butt.<br /><br />GOOGLE's the one with the balls at the end of the day.

[t8]

Microsoft should buy out...

Microsoft should buy out loser.com.<br />The traffic is reasonable and if they partner with Google on the ads, it will pay Steve Bs coffee bill each week.

[JCPayne]

YAWN--- Here's why Microsoft has no future anyways....

If Micro$shaft makes an operating system (OS) which is stable and people see no need to upgrade, Microsoft's revenues will plunge---- sharply....<br /><br />If Micro$shaft makes O/Ses that sucks and it requires people to keep buying OS/es which improve continually (just slightly) some people will become fet-up with paying for non-working OSes from Microsoft and will defect....<br /><br />So Microsoft can't win here.<br /><br />They will either:<br />1) Push to create an Operating System that runs over the Interent (e.g. you're computer dials into their computer upon boot up) that you must subscribe to monthly... (But this renders your P.C. useless if the Internet goes down on your PC....) But yet again--- more people will defect for Free O/Ses that can be installed locally.<br /><br />OR-<br />2) Microsoft can start making Operating Systems that expire on a certain day (Much like your current Virus Scanner company might do.) At which time you'd have to pay every month. Which again may mean some people will get fet-up and will look for alternatives.... No matter what--- Microsoft can't win they will never be able to make huge profits like they did in the past... Microsoft in the technology world is becoming a Netscape....