Microsoft Yodles Goodbye to Yahoo...For Now

On Saturday, Microsoft retracted its offer to buy Yahoo after last minute talks between Yahoo co-founders Jerry Yang and David Filo and Microsoft executives Steve Ballmer and Kevin Johnson. Microsoft was willing to pay $33 per share for Yahoo for a total acquisition cost of $47.5 billion, up from the last offer of $29 per share. "Clearly a deal is not to be" wrote Ballmer in a letter to Yang transmitted late in the day on Saturday.

Yahoo's board had wanted $53 billion, which amounts to $37 per share. At that price, almost double the value of Yahoo's stock when the takeover discussions started a few months ago, Microsoft evidently did not see the transaction as lucrative.

Additionally, it appears that Microsoft will not make good on its threat to take over Yahoo through a hostile purchase of stock on the open market, known as a proxy battle. With sufficient ownership of Yahoo stock acquired through a proxy battle, Microsoft could have replaced Yahoo's board with a more acquisition friendly board. However, Microsoft has determined a proxy battle to be "not sensible" as Yahoo would have likely taken steps during the proxy battle which would make them "undesirable as an acquisition".

But don't think the discussions are over. If Yahoo is unable to successfully manage a turnaround and its stock prices drop into the low teens, Microsoft would likely make another offer later this year, which may be more difficult for Yahoo to turn away from.

Facts from this article taken from various third party online sources, including the Associated Press and the Austin American-Statesman.