Steve Ballmer said the deal would happen if the circumstances were right, that it wouldn’t if they were wrong. He said walking away was an option. He wasn’t kidding.
The reversal followed a face to face meeting in Seattle between Steve Ballmer and Jerry Yang, Saturday morning. People familiar with the negotiations said Microsoft had increased its offer to $33, a share ($47.5 billion) but that Yahoo was unwilling to accept anything less than $37.
“After careful consideration, we believe the economics demanded by Yahoo do not make sense for us,” Ballmer said in a statement. He also added that going to a hostile takeover would not have been “sensible.”(Full text of the Goodbye Letters can be found here)
Yahoo’s exploratory collaboration with Google on search related advertising was cited as one area of trouble undermining an agreement, price notwithstanding. Sources also indicate that institutional shareholder pressure may have been a factor too. As has been previously reported (and can be seen in the graphic(click to enlarge)), Yahoo and Microsoft share a number of mutual ‘friends’; there was tremendous overlap between each company’s lists of largest institutional shareholders. Any prolonged takeover effort could have had a substantial negative impact on these investors combined holdings. The Shareholders were pushing for a fast resolution, or no deal at all.
Some are speculating Microsoft’s withdrawal now may only be an intermediate step in a soap opera with another act still to come. According to the logic, Microsoft’s withdrawal will likely cause a noticeable drop in Yahoo’s current stock price. If Yahoo’s strategic plan can’t return that value in the coming months, shareholder pressure could drive Yahoo’s board back to the Redmond bargaining table. While such a path is possible, and not unprecedented – it would borrow from the playbook Oracle used in acquiring BEA – it’s not likely.
Per Ballmer’s letter, “Clearly a deal is not meant to be.”
For the foreseeable future, the companies will go it alone – that’s a victory for rival Google, a sigh of relief for Yahoos, and likely a victory (in the near term) for Microsoft stockholders whose upside has been temporarily handcuffed with deal uncertainty.
•The Official Goodbye Letters
•Still Waiting, the Ultimatum that Wasn’t
•Yahoo’s Big Test: Q1 Earnings Results In
•MSFT Earnings: Numbers Ok, Future a Little Hazy
•Yahoo Microsoft, Two Fateful Days in April
•Yahoo to Microsoft: Still Not Interested, unless the Price Rises
•Microsoft’s Ultimatum: 3 Weeks or Proxy Fight (Letter Reprint)
•Microsoft and Yahoo In the Clouds: An Alternate Theory of the Deal
•News Corp and Yahoo: Possible but not Probable
• Microsoft Bids for Yahoo: Aims for Internet Powerhouse
•Dear Yahoos: We Say No To Microsoft
•Dear Jerry, Microsoft’s Letter to Yahoo
•Yahoo to Reject Bid?: What’s Next if it Happens
•Yahoo Q4 Earnings
•Bill Gates CES Forecast of the Future
•Microsoft and Viacom Tie Up Advertising