REDMOND, WA — Claiming the asking price Yahoo! demanded is too high and any hostile takeover battle would devalue the acquisition, Microsoft over the weekend abandoned its bid to buy the search engine.“Clearly a deal is not to be,” Microsoft Chief Executive Officer Steve Ballmer wrote to Yahoo! CEO Jerry Yang on Saturday.
The note ended months of posturing by Microsoft and threats to acquire the search engine by hostile means, if necessary, in a bid to mount an effective challenge to category behemoth Google. Microsoft is said to be seeking a way to kick-start efforts to corral a larger portion of the lucrative search-advertising revenue market.
Yang released a statement saying the now-defunct negotiations demonstrated Yahoo’s value despite a previous downward trend in the company’s stock prices. The very public Microsoft-Yahoo! battle boosted Yahoo!’s closing share price to $28.67 on Friday, a figure almost 50-percent higher than the stock’s selling price before the wrangling began.
However, after news of Microsoft’s exit became public, Yahoo’s share price tumbled by about 20-percent on Monday, to a low of $22.97 before rallying a bit to $24.24.
In contrast, Microsoft’s share price rose 2.6-percent to $29.81 on the NASDAQ, apparently evidential of a collective sigh of relief among investors at the news the software giant wasn’t willing to overpay for the search engine. At the same time, Google’s share price rose 2.2-percent to $594.28.
Talks between Microsoft and Yahoo! began February 1st, when Microsoft offered to pay $31 per share for a total of about $44.6 billion. The offer was significantly higher than the $19.18 at which Yahoo! stock closed on January 31st. The price bounced back and forth between the parties, with Yahoo! demanding as much as $40 a share in April before proposing $37 per share later the same month. Microsoft countered with $33 per share, a deal that didn’t fall far from the asking price at least one Yahoo! shareholder would have accepted.
Bill Miller, a portfolio manager for Yahoo!’s second-largest shareholder, told the New York Times he would have considered $34 or $35 per share.
Now Yahoo! seems to be left in the unenviable position of placating shareholders or risking their wrath. Analysts already are saying they expect lawsuits to be filed against Yahoo! management over the breakdown in talks and subsequent stock-price tumble.
Yahoo! reportedly remains in talks with Time Warner’s AOL division about a possible merger or partnership. The company also may be pursuing a partnership of some kind with Google, according to published reports.
“There is going to be a lot of pressure on Yahoo!’s management to deliver in the next year or two,” Miller told the New York Times.
