Microsoft Abandons Yahoo Acquisition

Microsoft has dropped its nearly three-month-long pursuit of Yahoo, ending a historic acquisition attempt whose failure takes Microsoft back to square one in its quest to boost its online business to better compete against Google.

"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole. Our goal in pursuing a combination with Yahoo was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees," said Microsoft CEO Steve Ballmer in a statement distributed early Saturday evening.

More Money Not Sufficient

Microsoft had raised its initial bid by about US$5 billion, but that didn't convince Yahoo to accept the revised offer, Microsoft said. "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, employees and other stakeholders to withdraw our proposal," said Ballmer.

In response, Yahoo issued a statement reiterating its position that Microsoft's offer was too low, and saying that many Yahoo shareholders agreed with its position.

"Yahoo is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market," Roy Bostock, the chairman of Yahoo's board, said in the statement.

Yahoo CEO Jerry Yang said that "with the distraction of Microsoft's unsolicited proposal now behind us" Yahoo can continue with "the most important transition in our history."

All parties with a stake in the deal had been waiting for Microsoft to announce its next move, after Yahoo failed to agree to a deal by last Saturday, the deadline Microsoft had set three weeks earlier.

But Microsoft stayed silent for days, as observers speculated whether it would walk away or prepare a hostile takeover. However, on Friday anonymously sourced reports in The Wall Street Journal and The New York Times said that Microsoft and Yahoo had turned a corner and were for the first time negotiating merger terms in earnest.

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