Microsoft drops bid for Yahoo

May 4, 2008 Microsoft has announced it is dropping its bid to acquire one of their Internet competitors, Yahoo!, after a three-month courting effort by Microsoft. Microsoft chief executive officer, Steve Ballmer notified Yahoo! chief executive officer, chairman and co-founder, Jerry Yang via a letter that Microsoft was dropping their bid for the Sunnyvale, California based search engine giant.

In a press release from Microsoft, Ballmer said, “Despite our best efforts, including raising our bid by roughly US$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”.

Microsoft withdrew its bid effort after raising their bid from $44.6 billion to $47.5 billion, which works out at $33 per share. However, Yahoo! were waiting for a bid of around $53 billion, which was more than Microsoft were willing to pay.

Microsoft had previously wanted to takeover Yahoo! in-order to compete with Google, the market leader in online advertising. The online advertising market was worth $40 billion in 2007 and will rise to an expected $80 billion in 2010.

Some observers, however, are speculating that the bid withdrawal could just be another tactic in their attempt to acquire Yahoo!. Yahoo shares have dropped since the bid was pulled out.