There has been a long and tumultuous battle of words between Microsoft and Yahoo ever since the Redmond-based software giant decided to make a bid for Yahoo in early February. Microsoft offered to buy the search giant for $44.6B which included a 66 percent premium on Yahoo's stock price at the time.
Shortly after the offer was made, Yahoo chairman Terry Semel resigned. A week later, Yahoo rejected Microsoft's offer. The back and forth between the two companies for over three months and last week, Microsoft gave Yahoo an ultimatum with regards to coming to a deal for the proposed buyout.
The two companies were unable to come to an agreement and Microsoft CEO Steve Ballmer announced yesterday that his company withdrew its offer to buy Yahoo. "We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo! and the market as a whole, said Ballmer. “Our goal in pursuing a combination with Yahoo! was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees."
"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," Ballmer added.
Ballmer went on to say that taking the matter directly to Yahoo shareholders would have been a futile effort and would have resulted in a drawn out proxy battle. Ballmer also took the time to take a jab at the budding relationship between Yahoo and Google.
"It would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system," quipped Ballmer. "This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth."
While Ballmer offered a long, wordy letter to Yahoo CEO Jerry Yang regarding his decision to withdraw the offer, Yahoo Chairman Roy Bostock kept his commentary to a minimum.
"From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft’s offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view," said Bostock. "Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making."
Yang offered his own thoughts and expressed his annoyance with the entire process. "This process has underscored our unique and valuable strategic position," remarked Yang. "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 maximize our potential to the benefit of our shareholders, employees, partners and users."
Where this will leave Yahoo is anyone's guess, but it's not every day that someone says no to Microsoft. Yahoo may see this is a victory against the 800-pound gorilla in the room, but it remains to be seen how shareholders will react to the Microsoft's move.