Microsoft / Yahoo deal falls through after 3 months of bargaining
Microsoft withdrew their offer to buy Yahoo late Saturday after Yahoo refused to drop their asking price.
The two companies ended up about 5 billion dollars apart at the end of negotiations, with Yahoo holding out for $37 per share and Microsoft refusing to go higher than $34 ( a raise of 5 billion over the current valuation). Microsoft had originally offered to buy out the internet portal at the end of January, two days after Yahoo had reported weak quarterly earnings.
The triangle of Yahoo, Google and MSN has drawn great attention over the past months as offers and counteroffers have flown back and forth. Google’s recent acquisition of DoubleClick beat out Microsoft’s move to capture the online ad server company. Now Google seems likely to walk away the victor in the battle over the Sunnyvale internet provider as well, provided they can deal with anti-trust issues.
Users of Yahoo have defected in recent years, claiming the results from Google and MSN are more reliable and spam free. Yahoo’s supposed dependence on meta-tags also makes it less attractive to users, as Google has surged to the forefront with friendly tools that do not require HTML knowledge. As of a March survey Yahoo still led the pack with the highest number of unique users, but Google is rapidly gaining and outstrips Yahoo easily in terms of market share searches by a two to one margin.
Microsoft has fallen so far behind the other two that the marriage with Yahoo was assumed to be the master plan for regaining a competitive edge. The software-maker’s weak grasp on a mere corner of the ad market was supposed to be strengthened by the proposed purchase, but now they may have to come up with a new web advertising strategy to compete with Google’s own strong position in the field.
Microsoft’s CEO, Steve Ballmer, said Saturday that the main reason for walking away from negotiations with Yahoo was a proposed plan to outsource paid searches from Yahoo to Google. He stated concerns that such a decision would enable Google to raise prices for current Yahoo advertisers.
“…such an arrangement … would make an acquisition of Yahoo undesirable to us for a number of reasons,” Ballmer wrote in a letter to Yahoo Chief Executive Jerry Yang.
Yahoo’s board of directors claims that the Microsoft offer significantly undervalued the company, and Yang said Saturday night that Yahoo will now focus “on executing the most important transition in our history.”
What this transition might be is left open to speculation. Analysts are wondering whether MSN will be back at the table with a revised offer, or if a deal with AOL is in the works. Rumors are also flying over a proposed alliance between Yahoo and News Corp, which owns the wildly popular ‘MySpace’.
Meanwhile, Yahoo stock (which had risen substantially with the MSN proposal on the table) fell over 20% Monday after Microsoft withdrew their offer.