Microsoft rules out renewed Yahoo bid

Craig Mundie says it's time to implement "plan B"

Phil Muncaster, IT Week 08 May 2008

Microsoft has ruled out making a renewed approach for internet giant Yahoo, according to reports.

"The market may wish that the Yahoo deal may come back together, but Microsoft at least at this point assumes it's over," Microsoft's chief research and strategy officer Craig Mundie told Reuters in an interview. "We know what we thought it's economic limits were and that didn't come together, so we've moved on and we will go back and implement plan B that we've been on in any case,"

Microsoft first made the $44.6 billion offer back in February, and recently upped it to $33 per share, which would have added nearly $5 billion to the overall price. But the two sides failed to reach agreement over the price.

In a letter to Yahoo chief Jerry Yang, Steve Ballmer explained that a proposed search advertising tie-up with Google would make a Yahoo acquisition " undesirable", as it would undermine Yahoo's own Panama paid search platform, raise regulatory and legal issues and give Google too much control over setting the rate of paid search terms.

However, some have speculated that Microsoft could eventually prevail, as Oracle did with its acquisition of BEA Systems.

"The online services business is on track to lose a billion dollars this year … the deal has to go through, Microsoft needs Yahoo and Yahoo needs Microsoft, and the market needs a strong number two [behind Google]," said Gartner vice president, Neil MacDonald.

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