On Saturday, following more than three months of unproductive negotiations, Redmond, Washington-based  Microsoft withdrew its offer to purchase Sunnyvale, California-based Web pioneer Yahoo and was left to consider other measures to help combat the increasingly large role Google plays in the current Internet business. Microsoft chief executive Steven Ballmer sent official news of his decision to abandon pursuit of Yahoo in a letter mailed Saturday afternoon to Jerry Yang, chief executive of Yahoo, as the two large firms were unable to reach agreement on an acceptable price for Yahoo. During final negotiations Microsoft had increased its initial $44.6 billion offer of February 1 to $47.5 billion, or $33 per share of Yahoo stock, however Yang and his management team held strong to a demand to accept no less than $53 billion, or $37 a share, an amount greater than Ballmer and his team were willing to pay, Ballmer said. A Failed Courtship Among Software Suitors On Monday Wall Street reacted to the withdrawal of Microsoft's bid with a sharp drop in Yahoo share prices representing a 15 percent loss - or some $6.5 billion, down $4.30 per share to $24.37 a share. Some Wall Street analysts felt that Microsoft's move to buy Yahoo was a gamble, and that it was trying to leverage its position of wealth as the world's biggest software maker to purchase its way out of its predicament trailing search leader Google in an online advertising market that was worth $40 billion in 2007 and is predicted to double to $80 billion by 2010. In a computing era that has moved decidedly towards hosted applications and so-called cloud computing, where information and processing power is increasingly housed on servers in Google data centers worldwide, Microsoft has struggled to transition from the days when it dominated a personal computer-based world, and will now have to look past Yahoo for other avenues to help it gain ground in a society more Web-based than ever before. Ballmer will find the task of seeking other innovative partnerships falling more on his shoulders soon, as Microsoft chairman Bill Gates is pulling out of the workaday operations of the firm he helped found to pursue philanthropic pursuits. Microsoft Withdraws Three Month Old Bid For Yahoo Google may have helped tilt the scales of fate in favor of Yahoo, and against suitor Microsoft, when it agreed to allow the Sunnyvale company to run some of its more lucrative online advertisements, a move that helped  increase the value of Yahoo. Google co-founders Larry Page and Sergey Brin and chief executive Eric Schmidt are generally thought to be on friendly terms with Yang and others at Yahoo, and last month Schmidt publicly expressed his fondness for Yahoo. "It’s nice to be working with Yahoo," Schmidt said. "We like them very much," he added. Google and Yahoo have a history of aiding one another in ways both large and small dating back to Google's early days, when Yahoo agreed to allow the Mountain View firm to provide search results to its Web portal. Over the next few days Yahoo hopes to increase the scope of its search advertising deal with Google, however it may face increased scrutiny from antitrust regulators wary of seeing Google increase its dominance in the area. Yahoo may also not have seen the last of Microsoft as a suitor, with some analysts suggesting a future lower offer from Ballmer's firm may occur if Yahoo's stock should fall enough to make such a move attractive to Yahoo shareholders looking to maximize their investment. Industry Reaction To Failed Bid Mixed Computing pioneer Mitch Kapor, the man behind the free Firefox Web browser and who founded 1980s spreadsheet giant Lotus Development, saw parallels between Microsoft's battle for control of Yahoo and earlier conflicts between IBM and Microsoft. "The irony is that what Microsoft did to IBM, Google is doing to Microsoft," Kapor said in a recent New York Times report. Members of the online discussion forums operated by WebmasterWorld, a community of webmasters and search engine marketing (SEM) professionals founded by chief executive Brett Tabke,  held a variety of reactions to Saturday's news of Microsoft withdrawing its offer for Yahoo. One WebmasterWorld member saw Microsoft's move as a well thought out part of a future move for control of Yahoo. "This is one of the strategies that many of us thought will be used by Microsoft," the member, using the handle "dingloo," noted. Another WebmasterWorld member expressed similar sentiments. "It could be more posturing to pressure Yang to reconsider," noted a WebmasterWorld member using the handle "potentialgeek." Others saw the move as a victory for Yahoo. "Yahoo is the clear winner," wrote a member named "swa66," and another member named  "ronin" noted, "This last episode has shown that Yahoo values its own originality and independence as well as its share price." "While it's true that Yahoo isn't at the top of search, they still have lots of valuable eyeballs using their other services daily," added another member who used the handle "IanKelley," referring to Yahoo's position as the top global Web destination. Some search engine industry observers at WebmasterWorld saw the outcome as a failure on Yahoo's part. "Ballmer called, Yahoo folded and lost. Next stop is $5.00 a share in less than two years," wrote a member using the handle "drall." Google May Be The Biggest Winner In Failed Bid Others see the failed Microsoft bid for Yahoo as a sign that Google may be the biggest winner in the machinations of the past three months. "I think it is very much the end of the search game," noted a member using the handle "trungngo," while another member, using the alias "ByronM" also spoke to Google's role in a post Microsoft - Yahoo deal world. "Sure, Google wants to 'index the world's information' in a way - but mostly they're concerned with monetizing the worlds information," the member noted. In a weekend news release Ballmer disclosed his reasoning behind withdrawing his offer for Yahoo. "Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer," Ballmer noted. "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," added Ballmer. A separate news release detailed some of Yahoo's reasoning behind refusing to agree to Microsoft's last offer. "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 Yahoo chairman Roy Bostock. Related Links:
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10:26 pm on May 5, 2008 (utc 0)
