Microsoft's bid for Yahoo ends

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"I hereby formally withdraw Microsoft's proposal to acquire Yahoo."

That was the gist of a lengthy letter sent by Microsoft CEO Steve Ballmer on Saturday to Yahoo CEO Jerry Yang.

Microsoft had been trying to purchase Yahoo since Jan. 31. It first offered $31 per share, though it did not respond publicly as Microsoft's own stock sank, thus lowering the half-stock, half-cash bid by almost $2 a share.

But in Ballmer's letter, he revealed Microsoft's latest bid was $33 a share, while Yahoo was holding out for $37 per share.

Microsoft's $33 offer was about a 70% premium to where Yahoo shares were trading before Jan. 31, valuing Yahoo at $47.5 billion. Yahoo was seeking about $52.5 billion.

News of the rescinded offer is expected to crush Yahoo shares today, given that there are no other known bidders for the company. Some experts also predict shareholder lawsuits will be filed against Yahoo.

Ballmer also made it clear that he would not attempt a hostile takeover because he fears Yahoo would take steps to make the company less desirable to Microsoft, as it has already done with a test partnership with Google, a primary Microsoft rival.

In fact, Ballmer spent considerable effort laying out his concerns about the Yahoo-Google initiative, which he refers to as "the outsourcing to Google of key paid Internet search terms offered by Yahoo today." (partialdiff)
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