Yahoo! breaks off talks with Microsoft

Yahoo has announced that its talks with Microsoft about the latter buying either the whole company, or a part of it, have now finally concluded. Following the breakdown of Microsoft's competition with Google to buy the search-engine business, the software giant wanted to acquire at least the search machine, in order to get into the lucrative advertising business.

Representatives of Microsoft and Yahoo met on Sunday, and Microsoft is reported as having said it is no longer interested in buying the whole search-engine company, even at the price it had previously offered ($33 per share or $47.5 billion in total). The Yahoo board of directors, "after careful evaluation", decided not to sell the search-engine business, because it was "critical to its strategic future". The stock exchange reacted to the decision with a more than 10 per cent drop in the Yahoo share price. Carl Icahn's reaction to this news – the major shareholder who called for the dismissal of Jerry Yang, the group's head and co-founder, and who advocated the takeover by Microsoft – is not yet known.

The Washington Post is reporting that Yahoo! and Google are close to an agreement under which Google will run the advertising business for Yahoo!. It estimates that this could bring Yahoo! more than a billion dollars of income. However, cooperation between the two biggest search-engine groups would probably entail proceedings under cartel law. Microsoft, the third-largest search-engine operator, has already stated its intention of protesting.

Microsoft has issued a statement saying it is not interested in rebidding for the whole company. The two companies, it says, have continued to discuss an "alternative transaction" that would deliver more than $33 per share to the Yahoo! shareholders and would ensure "healthy competition in the marketplace" to the benefit of all concerned. Microsoft affirms that its "alternative transaction" remains available for discussion.

(trk)