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San Fransico - Yahoo claimed victory late on Saturday after Microsoft said it was walking away from its unsolicited takeover attempt for the struggling Internet giant, but some observers said the battle for control of Yahoo may not necessarily be over.
Microsoft said earlier Saturday that it was walking away from its $31 per share offer, which initially valued Yahoo at $44.6bn, because it was unable to reach an agreement with Yahoo over price. Microsoft noted that it had been willing to raise its bid by about $5bn.
"We don't think its over. It's clear that Microsoft needs Yahoo and there is going to be outrageous pressure on Yahoo management from shareholders," said Gene Munster, analyst at Piper Jaffray.
That's because Yahoo shares were seen to open Monday at about $21, down from Friday's close of $28.67, analysts and arbitrageurs said. Investors unhappy about Yahoo's prospects had driven the company's shares down to $19.18 the day before Microsoft announced its $31 per share offer.
Analysts and arbitrageurs said Yahoo shares wouldn't likely fall to the $19 range because some shareholders would be betting that Microsoft was merely trying to ratchet up the pressure on Yahoo. Several shareholders have already sued Yahoo for rejecting Microsoft's bid.
Shareholder revolt
Yahoo co-founder and chief Executive Jerry Yang was quick to declare the dance with Microsoft was over. "With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximise our potential to the benefit of our shareholders, employees, partners and users," he said in a statement.
In a letter to Yang made public by Microsoft, chief executive Steve Ballmer said he was willing to raise his offer to $33 per share, which would have reflected a 70% premium to the price at which Yahoo's stock closed the day before Microsoft's Feb.1 offer. Ballmer indicated that Yang wouldn't agree to a deal for anything less than $37 per share.
"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.
Ballmer also said he decided against a hostile takeover attempt because it would have involved a protracted proxy contest, and he concluded that Yang would take steps that would make Yahoo undesirable as an acquisition for Microsoft.
In particular, Ballmer noted that Yahoo's proposal to outsource its search advertising to rival Google would make Yahoo undesirable to Microsoft because it would create a host of regulatory issues and fundamentally undermine Yahoo's own strategy and long-term viability.
Microsoft said repeatedly that buying Yahoo would be its best opportunity to narrow the gap with Google, which dominates internet search and the online text advertising market.
- Dow Jones