The Guardian reported that takeover talks between Microsoft and Yahoo! ended on Saturday, with Microsoft increasing its offer for the search engine from its initial bid of $42 billion to $48 billion, reflecting a $33 share price. The offer, made at a meeting between senior staff from both camps in Seattle, was intended to create a technological powerhouse capable of taking on Yahoo!'s arch-rival Google. However, Yahoo! founders Jerry Yang and David Filo were said to want at least $37 a share, or a price of $53 billion, and their refusal to accept the bid effectively ended a three-month pursuit that was intended to reshape competition for e-mail, search and online advertising.
Commenting on the negotiations, Steve Ballmer, chief executive at Microsoft, said: "Despite our best efforts, including raising our bid by roughly $5bn, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us."
In a statement, Yang said he was "incredibly proud" of his team's unity since Microsoft's approach: "With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximise our potential to the benefit of our shareholders, employees, partners and users."
Created 13 years ago by Yang and Filo while still students at Stanford University, Yahoo! was the most popular entry point and search engine for online users worldwide in the late 1990s. But in recent years the engine has been overshadowed by Google and frustrated investors with its drifting strategy and failure to carve out a distinctive path for itself. One of the reasons for Yang and Filo's reluctance to enter negotiations with Microsoft is their protectivness of Yahoo!'s distinctive quirky company culture.
Among Microsoft's reasons for declining to offer more money were the expensive severance benefits included in the contracts of key Yahoo! employees to compensate them in the event of a takeover. The software giant was also wary of Yahoo!'s experimentation in outsourcing certain search advertising to Google, believing this undermined Yahoo!'s key Panama technology and could cause an exodus of disillusioned engineers.
Microsoft insiders insisted that the firm's decision to end talks was a formal decision rather than a negotiating ploy, but industry experts maintain that the software company could try again at a lower price at a later stage should Yahoo! fail to revive its faltering performance.
The search engine braced itself for a backlash from its shareholders following its decision, and saw shares drop 20 percent on Monday when markets opened, trading at $23.02 per share, down from Friday's closing price of $28.67. This was still well above the $19 per share that Yahoo! was trading at when Microsoft made its initial offer three months ago, and the stock closed on Monday at $24.37, down 15 percent, not nearly as bad as some analysts expected.
