Microsoft walks away from Yahoo bid

It has emerged that software company Microsoft has withdrawn its bid for Yahoo.

Steve Ballmer, Microsoft’s chief, formally withdrew the offer in a letter this weekend to Jerry Yang, Yahoo’s co-founder.

The letter said I am disappointed that Yahoo has not moved towards accepting our offer, I still believe that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares.

By failing to reach an agreement with us, you and your stockholders have left significant value on the table. But clearly a deal is not to be.

According to analysts, Yahoo could face legal action from shareholders after rejecting the bid.

As a result of the collapsed deal, Yahoo’s German-listed shares dived 17% and analysts are expecting Yahoo’s US shares to fall by a similar margin.

According to Roland Hirschmueller, an equities trader at German brokerage Baader, Mr Yang is certainly under a lot of pressure now adding his days are numbered, if he doesn’t manage to come up with an alternative strategy.

Since the unsolicited bid in early February, Yahoo’s shares gained around 50%.

Microsoft wanted to buy Yahoo to gain a bigger portion of the online advertising market, which is valued at $40 billion a year and is expected to double to $80 billion a year by 2010.

A combination of Yahoo and Microsoft would have helped the software group to compete more effectively with Google, the world’s largest internet company.

Last week Google announced it had exceeded analysts’ expectations and said first-quarter profits increased to $1.31 billion (£658.5 million), a rise of 30% compared with 12 months ago.

It has now been revealed that AOL, the internet arm of Time Warner, has approached Microsoft about a possible tie-up.

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