Sunday, May 4th 2008

Microsoft Withdraws Proposal to Acquire Yahoo!

Microsoft Corp. today announced that it has withdrawn its proposal to acquire Yahoo! Inc.
We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo! and the market as a whole. Our goal in pursuing a combination with Yahoo! was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees,
said Steve Ballmer, chief executive officer of Microsoft.

“Despite our best efforts, including raising our bid by roughly $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,” said Ballmer.

“We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners. While Yahoo! would have accelerated our strategy, I am confident that we can continue to move forward toward our goals,” Ballmer said.

“We are investing heavily in new tools and Web experiences, we have dramatically improved our search performance and advertiser satisfaction, and we will continue to build our scale through organic growth and partnerships,” said Kevin Johnson, Microsoft president for platforms and services.

Below is the text of the letter from Microsoft CEO Steve Ballmer to Yahoo! CEO Jerry Yang.
May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089


Dear Jerry:

After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!’s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a “hostile” bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:
  • First, it would fundamentally undermine Yahoo!’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.
  • Given this, it would impair Yahoo’s ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.
  • In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.
  • This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.
  • It could foreclose any chance of a combination with any other search provider that is not already relying on Google’s search services.
Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo!.
We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today 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.

Thank you again for the time we have spent together discussing this.

Sincerely yours,

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation
Source: Microsoft
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31 Comments on Microsoft Withdraws Proposal to Acquire Yahoo!

#1
beyond_amusia
I was waitin for this to pop up.. it made headlines yesterday. =P I think MS is now going to watch Y! stock plummet and then move in for the kill.
Posted on Reply
#2
lemonadesoda
This is a VERY LONG letter by Ballmer. Too long. It is either:

1./ Fake, or

2./ Spelling out issues of market collution with the dominant player, together with "poison pill", ready to take the issue to the MM commission, or pursue legal action againt said director. How? Becuase Ballmer is spelling out how, through "spite of hostile bid", the management team of Yahoo would take actions to destroy value for their shareholders. They would be legally liable to the shareholders for such action and could not only force their resignation, but pursue them for damages, or

3./ Its a trojan horse. MS will not take Yahoo in ONE hostile bid, but will work with an invement bank / private equity firm to acquire stock through a third party until such point that together they have sufficient voting rights to appoint their own board members. Its not a hostile take over. But an accumulating stakeholder in Yahoo until such point that MS has controlling influence.

All in all, odd.

Yahoo should remain alert.
Posted on Reply
#3
Azazel
they should have sold. yahoo really dies suck
Posted on Reply
#4
unsmart
:rockout: I love to see MS told to" F off and take you cash with you":slap:
Posted on Reply
#5
jbunch07
damn they were wiling to raise their offer to $33 bucks a share and they still said no.
im sorry but i think that was kind of stupid on yahoo"s part!
Posted on Reply
#6
Triprift
Id have to agree with ya if it was anyone other than ms id day yahoo would of accepted.
Posted on Reply
#7
FreedomEclipse
~Technological Technocrat~
by: lemonadesoda

3./ Its a trojan horse. MS will not take Yahoo in ONE hostile bid, but will work with an invement bank / private equity firm to acquire stock through a third party until such point that together they have sufficient voting rights to appoint their own board members. Its not a hostile take over. But an accumulating stakeholder in Yahoo until such point that MS has controlling influence.
In other words yahoo are going to get 'assimilated'

Interbreeding with the Yahoo stocks until yahoo stocks become M$ stocks
Posted on Reply
#8
beyond_amusia
by: Triprift
Id have to agree with ya if it was anyone other than ms id day yahoo would of accepted.
But no one else could afford $50 billion... Yahoo is stupid, and their stocks will plumet, and MS will have the last laugh in this.
Posted on Reply
#9
jbunch07
by: beyond_amusia
But no one else could afford $50 billion... Yahoo is stupid, and their stocks will plumet, and MS will have the last laugh in this.
sad but true...unless yahoo partners with google?!
Posted on Reply
#10
beyond_amusia
by: jbunch07
sad but true...unless yahoo partners with google?!
The EU, China, and the US would tear them apart for even trying it... The Supreme Court is already looking at that 3 day trail Yahoo did with Google...
Posted on Reply
#11
robodude666
I'm glad to see a company who cares about who they are being bought by. So what if Microsoft offered a large sack of money? If Yahoo doesn't want to take that sack of money then they shouldn't have to. They are probably working out a deal with Google as we speak. Personally, if I was a big company, I'd rather accept $30mill from Google than $50+mill from Microsoft.
Posted on Reply
#12
effmaster
by: robodude666
I'm glad to see a company who cares about who they are being bought by. So what if Microsoft offered a large sack of money? If Yahoo doesn't want to take that sack of money then they shouldn't have to. They are probably working out a deal with Google as we speak. Personally, if I was a big company, I'd rather accept $30mill from Google than $50+mill from Microsoft.
REad the post above you dude its not ever going to happen PERIOD. Unless Googles share of the interent starts to dramatically fall down like crazy and Microsofts starts to increase like crazy (not likely to happen anytime soon though.

Maybe Microsoft should be looking to take over ASk.com that would be a pretty good takeover bid if you ask me.
Posted on Reply
#13
wazzledoozle
Microsoft would be better off taking just a fraction of the money that would have been used in a takover bid of yahoo, and strengthening their own Live brand. Yahoo isn't even relevant anymore.
Posted on Reply
#14
pmrdij
note: <-- not an MS fanboy but rather a fanboy of Goliath, er, Google.

by: wazzledoozle
Yahoo isn't even relevant anymore.
i completely agree.

oh how i look forward to Monday's stock numbers for Yahoo!. i side with Ballmer that Yahoo!'s hierarchy has done everything they could to make themselves undesirable while in the process acquiring unnecessary services to make the price increase they demanded seem acceptable (to whom i do not know).. can't wait to wake up tomorrow morning and see how their shareholders react to such and MS officially saying that the money is off the table.

http://finance.google.com/finance?q=YHOO

- Robert (PmR)DIJ
Posted on Reply
#15
techie81
Bad move on Yahoo's part, they are old news.
Posted on Reply
#16
Haytch
I havnt used Yahoo services in years. I never will again anyways. Theres just far better out there!
Yahoo did not do the right thing by its investors and should have sold for the top dollar.

I dont think MS will persue the aquisition of Yahoo untill its worthless, but im sure they will merge with someone else before considering MS as a viable option. In the meantime MS will use it as an example and move onto something more strategic. Improving ' Live ' would be their best longterm goal. $5 Billion to improve Live seems very doable, especially with one of its competitors about to hit the ground floor!
Posted on Reply
#17
effmaster
by: wazzledoozle
Microsoft would be better off taking just a fraction of the money that would have been used in a takover bid of yahoo, and strengthening their own Live brand. Yahoo isn't even relevant anymore.
I still use Yahoo as my email account:slap::slap:
Posted on Reply
#18
Dangle
by: Azazel
they should have sold. yahoo really dies suck
Fuck yea they should have. Yahoo stock was ~$20 before the MS bid. Immediately after the bid, their stocks rose to $30. MS was offering ~$32. That's 30% more than yahoo was worth. Their stocks have been falling ever since 2000. Yahoo is a piece of shit, not worth $40 per share or whatever they were asking for.

The upper management only denied the request so they could keep their jobs. I'm glad MS pulled their bid. I can't wait until monday!!!!!

by: effmaster
I still use Yahoo as my email account:slap::slap:
Exactly. You, and people like you, are the ONLY reason MS wants to buy Yahoo. There's really nothing else besides a user base that Yahoo can contribute.
Posted on Reply
#19

Pure idiocy. Yahoo shares will drop to $10 a piece by q4 and then MS will buy them out for bugger all.
#20
panchoman
Sold my stars!
yahoo widgets are pwnage :slap:

only good thing about yahoo really..
Posted on Reply
#21
Nitro-Max
tbh looks to me as if yahoo is holding out to see how much ms would raise the price now ms have pulled out i reckon a deal will be made pretty soon if yahoo cannot find another buyer.
Posted on Reply
#22
Triprift
Yahoo i rekon will have to accept a lower offer cus google aint gonna be there saviour.
Posted on Reply
#23
Ravenas
Google will be Yahoo's new partner.

Unfortunate that MS is literally failing on so many fronts right now it's not even funny.
Posted on Reply
#24
Dangle
I don't consider failing to mean withdrawing a ridiculously bloated bid for a shitty company.
Posted on Reply
#25
spearman914
by: lemonadesoda
This is a VERY LONG letter by Ballmer. Too long. It is either:

1./ Fake, or

2./ Spelling out issues of market collution with the dominant player, together with "poison pill", ready to take the issue to the MM commission, or pursue legal action againt said director. How? Becuase Ballmer is spelling out how, through "spite of hostile bid", the management team of Yahoo would take actions to destroy value for their shareholders. They would be legally liable to the shareholders for such action and could not only force their resignation, but pursue them for damages, or

3./ Its a trojan horse. MS will not take Yahoo in ONE hostile bid, but will work with an invement bank / private equity firm to acquire stock through a third party until such point that together they have sufficient voting rights to appoint their own board members. Its not a hostile take over. But an accumulating stakeholder in Yahoo until such point that MS has controlling influence.

All in all, odd.

Yahoo should remain alert.
LOL Long is fake??? Then okay letter "a" is one letter so consider I never typed that and it is fake?
Posted on Reply
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