Microsoft will announce shortly that they have withdrawn their offer to acquire Yahoo. Talks between the two companies and their advisors broke down earlier today, according to a source close to Microsoft, after a failure to come to agreement on price and other terms.
A final meeting occurred today at Microsoft headquarters in Redmond, between Jerry Yang and David Filo from Yahoo, and Kevin Johnson and Steve Ballmer from Microsoft. At that meeting, Yahoo said the lowest price they could accept was $37/share. Microsoft reportedly went as high as $33/share. Yang and Filo returned to California shortly after the meeting, and Yang then had a subsequent phone conversation with Ballmer. At that time Ballmer withdrew the offer.
Other facts are emerging around recent negotiations between the companies. A rough timeline:
- No meaningful talks occured between the companies until after Microsoft sent a letter to Yahoo on April 5 with a three week deadline to complete a deal.
- On April 15, execs from both companies met in Portland, Oregon to discuss valuation and integration issues.
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Following that April 15 meeting both sides signed a non disclosure agreement not to discuss any negotiations until after the April 26 deadline that Microsoft set in their April 5 letter.
- On April 18, Microsoft and Yahoo advisors had a phone conversation; Yahoo signaled a minimum price of $40/share.
- On April 29, there were multiple phone conversations between the companies; Yahoo supposedly said they would be willing to move from the $40 price and requested that Microsoft not go hostile or walk from the deal.
- On April 30 the teams met in California. Yahoo said $38 gets the deal done.
Microsoft is making it clear that this is not just a breakdown in discussions between the companies. They are withdrawing their earlier bid and are saying they will not go hostile. They’re walking away cleanly from the deal.
Update: Press Release:
Microsoft Withdraws Proposal to Acquire Yahoo!
REDMOND, Wash., May 3 — Microsoft Corp. (Nasdaq: MSFT) today announced that it has withdrawn its proposal to acquire Yahoo! Inc. (Nasdaq: YHOO).
“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.
Update: Letter From Ballmer To Yang
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 94089Dear 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,
/s/ Steven A. BallmerSteven A. Ballmer
Chief Executive Officer
Microsoft Corporation
Update: Email From Steve Ballmer To All Microsoft Employees
See here for text of email from Steve Ballmer to all Microsoft employees.
Update: Yahoo Responds
Yahoo was definitely slow to the trigger today with a public statement, but they have now issued a press release regarding the withdrawal of Microsoft’s offer.
Well done TC. First to the news….
WOW
Thank God.
Yaaaaaay! I’m happy.
Great Michael! Thanks for alerting us!
Now we can all move on to more important things, like why Youtube was down this morning.
damn
Bad news
Anyway, with all that money and a web approach they can make something. Kudos for the try. No back to work and buy some niche companies.
I wonder who they will be looking at next? Ballmer mentioned that they have other companies to look at if the Yahoo! deal fell through.
awesome, good BN
Awesome! I hope Yahoo learned a lesson from all this, and I hope they keep their newly-found desire to innovate alive.
That doesn’t mean they Microsoft is giving Yahoo up. They’re probably gonna go hostile now! Yeah!!!!
@6- you serious? You really think the youtube outage is more important??!!! Microsoft buying Yahoo is probably the best thing that could happen to the Internet. It’s time Google get some real competition and stop dominating the market!
Yay!
Good for Microsoft. Bad for Yahoo.
@11: Millions of us missed out on our Saturday mornings full of idiots breaking stuff, Britney-wannabes and Rickrolls. Sounds like you need to question your priorities
*ahem* mike, it’s no longer a slow news day.
good job on the scoop techcrunch, that’s why we read.
Waiting for more details. One person surmised that Microsoft was walking away completely, but this isn’t obvious at this time.
(Heard about your post from Steven Hodson, by the way.)
I give it 6 days until serious Google partnership talks begin.
I hope Yahoo board know what they are doing… thats not how negotiations should go!
Maybe it’s because of Google stepping in to save Yahoo!’s behind. I’d rather see a buyout from them than Microsoft.
A bad move by Yahoo. This near-death experience will not change the fact that the company long ago lost their edge and best talent or suddenly turn it into a high-growth company in a way that would support a valuation equivalent to what MSFT was willing to pay. Desire does not magically confer ability. If you haven’t sold yet…
Oooops, I hope this means a hostile takeover battle is coming.
1. I want this to happen, kick some Google butt maybe
2. This is the kind of a fun fight, lawyers sucking millions, injunctions flying all
over the place, press releases, some nasty emails popping out, real fun
Let the games begin
MS threw Apple a lifeline when they needed it the most in order to keep alive a weak competitor for anti-trust reasons. Google I’m sure will do the same with Yahoo. But I wouldn’t count Yahoo out just yet…
this is likely not over. msft will wait one quarter. yahoo will disappoint. and msft will enter with a lower bid.
Microsoft may now go after AOL or Valueclick if they really want to own the display advertising market.
Steve Ballmer’s Good Bye for Jerry Yang !! Finally!
Google and Yahoo need to partner again like they did in the old days. It’s pretty simple. Google runs the search (as was the case 7 – 8 years ago) for Yahoo, gives Yahoo lots of money each year (rather than the other way round as it was), and Yahoo focuses on what it’s good at.. running online media properties and selling advertising on said properties.
It’s all about comparative advantage. Google is good at running search and search advertising; Yahoo is good at running online media properties and selling advertising on them. They both focus on their strengths; everyone wins.
The Press Release:
http://www.prne...05689&EDATE
@christopher wrong you need approval to make acquisitions of this size.
Huh? So two real options, get the deal done or go hostile. Now Microsoft is back where they were in January? Are there other companies that Microsoft can go after? I am not sure they can just grow their business to compete online with Google let alone Yahoo.
I bet something interesting happens this coming week in tech aquisitions
@27 .. the link is already in the post along with the text in the letter!
Yang is as dumb as a doorknob. Google is the enemy here. Not Microsoft.
who does this hurt worse? On so many fronts….
This should be a Made-For-Tv tech soap opera.
Not good news for us search marketers.
Thank god that’s over.
@nobosh.com – what are you talking about? ballmer couldn’t get board approval for a $40B acquisition one quarter after it got approval for a $44.6B acquisition? come on, this letter clearly signals that Yahoo shareholders need to force the board not to partner with goog on paid-search in order to remain viable for acquisition at a later date.
Wow, as was said above, good for Microsoft, not so much for Yahoo.
Microsoft has plenty of other smaller companies that they can buy to get the same benefits without the baggage that would have come with Yahoo.
Yahoo, however, seems to be rather screwed. They are already getting pounded by Google and while Google will likely work to help keep them around I think that their time as a major player may be done.
while im glad yahoo! didn’t get eaten, Ballmer is grinning through his teeth in that letter: “We’re still right. You guys will crash and burn. Your shareholders will raise hell. And on that day, you’ll be ours for a fraction of this offer.”
A very interesting side to this story is that TechCrunch beat the NY Times and WSJ to the story by a minute and with more details… very connected, very cool.
Sweet! This just made my day!
Unless your a Yahoo! stockholder, this is good news for everyone!
PS
For everyone expecting Microsoft to go hostile, read the following update:
This Yahoo! love affair is now officially over. While I await the Yahoo! lawsuits to begin, it is clear the Microsoft will have to gain search engine market share the old fashioned way–by earning it.
~Darnell
Yang is an idiot and I hope Microsoft does go hostile just to kick his ass. I’m not a Microsoft fan but Steve Ballmer’s letter was spot on.
MicroWho?
TC first with the scoop! Nice work and what a relief that it is over. Counting on TechCrunch to deliver the next chapter in the saga.
so disappointed with yahoo and jerry yang’s lack of vision and his complete stupidity. //g
It never seemed like a good fit to me. I could see Microsoft taking a run at AOL. AOL has a big audience and could be the same platform for Microsoft to role out its web technologies for a much lower price. I think Yahoo will get picked up by someone else that makes more sense.
Some of you guys posting on here are morons and don’t have a damn clue about business. This isn’t about Microsoft being evil. Yahoo just literally signed their death sentence and in the process screwed over their shareholders. If I were a Yahoo shareholder or employee, I’d be PISSED OFF right now and looking for a new gig pronto as its only a matter of time before the pink slips start flying. On the brighter side, Microsoft comes out looking like the studs they really are. For the first time I can actually say that Steve B. just made the smartest decision of his career. Microsoft employees overwhelmingly did NOT want this acquisition to happen and they certainly did not want the company going into debt to do it. For that kind of money, Microsoft could go on an acquisition spree and buy the hottest companies on the market and expand their portfolio immensely at a fraction of the cost, not to mention they could invest heavily into their own people and really step the game up to put the final nail in Yahoo’s coffin. MSFT gave them a lifeline and like the pompous spoiled silicon valley brats that they are, they spit in their saviors face. Bad move Yahoo. Nice knowin ya…time to buy Microsoft stock baby!
Cool…now I don’t have to move my website. I cannot fathom why people thin this would have been a good move for anybody.
WHOHOOOOO!!!!!!! HAHAHAHA. TRY AND BE HOSTILE WITH A FRIENDLY COMPANY AND YOU WILL LOOSE. THANKS FOR THE OFFER, BUT NO THANKS. BULLY US? AND WE WILL GO TO OUR BIG BROTHER FOR HELP
YHOO R.I.P.