After Yahoo failed to move on price (below), let alone meet Microsoft half way, the deal is off. Microsoft has released a statement and the text of the letter from Steve Ballmer, chief executive officer of Microsoft. He says:
"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."
So now we wait to see whether Yahoo's management can survive the fall-out*. Yahoo's shares will now fall, and Microsoft's will rise. The only question for Yahoo is how low they go.
I suspect not many shareholders are going to watch their money vanishing and conclude: "Hey, that Yang guy is great: he saved the company." There will be some who want his head on a stick, and they may well try to get it.
But it's an ill wind, as they say. The uglier it gets, the more money there is for lawyers, and the more stories there are for journalists.
*Update: It's not just the money. I expect Yahoo shareholder lawsuits to argue along similar lines to Mike Arrington at TechCrunch, who described Yahoo's actions as a "scorched earth policy". On April 10, he wrote:
Yahoo has put costly severance plans in place to both retain employees and make themselves a less attractive acquisition candidate. But top talent has left anyway, and just about everyone at Yahoo seems to be looking for a job (even execs I've spoken with). Meanwhile, the Google deal shows they would rather give up the search marketing game, their biggest asset, than become part of Microsoft. . Their actions, which appear to be based on destroying their market value as a counter to the Microsoft bid, benefit neither their stockholders nor their employees. And by setting up Google as the only real option in search marketing, they are disrupting what little market balance and competition exists in that space today.
So the question is whether Yang and his board have acted out of pride and prejudice or whether they have acted in the best interests of shareholders, which they are supposed to do. (Yahoo's official response is here.) Now, how many Yahoo shareholders will think they are better off if they have Yahoo shares worth, say, $16.50 each than if they'd traded them to Microsoft for $33?
Of course, Yahoo shares could also go up. They start trading again on Monday....
