In a move that caught many observers by surprise, Microsoft CEO Steve Ballmer walked away from his bid to purchase number two search engine Yahoo. The move ended three months of dramatic maneuvering on the part of both companies. Nevertheless, the rampant speculation continues.
Microsoft's original offer was $31 per share in a combination of cash and stock. That represented a premium of more than 60 percent on Yahoo's stock price. Yahoo, however, insisted the price was too low. Though the statement was clearly a negotiating tactic, it was also very clear that Yahoo CEO Jerry Yang did not want to see his company fall into the hands of the software giant, and he was willing to do just about anything - even strike up a deal with arch rival Google - to prevent that from happening.
It's been clear for a while that Microsoft was getting impatient with the whole process. While rumors say that the two companies have been in talks on and off for the past year, the pressure has escalated recently as Hitwise, comScore and other firms that measure the popularity of websites have shown Yahoo and Microsoft's search engine losing market share to Google. With Google increasing its lead, Microsoft must have felt pressure to do something, anything, to shake things up.
It's been pointed out by better analysts than I that a merger between the Microsoft and Yahoo would still leave them a distant second in the search field to Google. According to a recent release from Hitwise, Google handled more than 67 percent of US searches in March 2008, while Microsoft and Yahoo put together didn't even field 30 percent of of US searches for the same period.
So what heated up the bid, and what will both companies do now that the wedding has been called off? In this article I'll review the events leading up to the meltdown, the reactions from both companies and a number of analysts, and what could happen moving forward.
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