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Mere mention of the possibility of renewed talks sends Yahoo stock price up 17%

Mention the name Yahoo today in the tech community and immediately thoughts of the failed talks of buyouts or partnerships with Microsoft jump to many minds. Yahoo held out for far more money than anyone outside of Yahoo management though the company was worth, ultimately leading to talks falling through.

Not only did talks between the two companies halt with Microsoft firmly stating that it had no interest in acquiring Yahoo, but Yahoo's stock price soon fell to the lowest point it has traded at in over five years. Recently Microsoft CEO Steve Ballmer said that a web search advertising deal with Yahoo still makes sense and may be possible.

The mere thought that talks between the software giant and Yahoo could be rekindled sent Yahoo stock prices surging by 17 percent reports Reuters. That gain was short lived and the price dropped back to a 12% gain after Microsoft released a statement saying it had no interest in buying the stock.

In February of 2008, Microsoft made an unsolicited offer to buy Yahoo outright for about $47 billion. Yahoo turned the offer down, asking for more money. Microsoft eventually bumped its offer up to around $33 per share, which Yahoo still turned down.

Reuters quoted Ballmer at a Gartner conference in Florida saying, "Perhaps there will continue to remain opportunities to partner around search. Ballmer continued saying, "We offered 33 bucks (per share) not too long ago and it's (Yahoo stock price) 11 and a half. So I don't know what price might have got the job done."

If Microsoft and Yahoo did return to the negotiating table, the deal would face new problems according to Reuters. Yahoo's stock price is severely depressed and the market for advertising in general is down thanks to reduced spending in the face of the slowing economy.

Cross Research analyst Richard Williams believes that Yahoo might not be the fit Microsoft needs now after reprioritizing its search efforts. Williams says, "The larger issue is strategic fit. Microsoft clearly has spent money and changed its focus to 'build' rather than 'buy'."





"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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