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| Microsoft exit hits Yahoo shares |
| Yahoo's shares plunged 20% in early trade in New York after software giant Microsoft scrapped its three-month-old bid to buy the internet firm
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| UNITED STATES OF AMERICA
, 5-May-2008
8:9:52 AM |
| The deal collapsed after the two sides could not agree on the sale price.
Microsoft boss Steve Ballmer formally withdrew the offer in a letter this weekend to Yahoo's head, Jerry Yang.
Yahoo stock slid 19.7% to $23.03, erasing a big chunk of the 50% gain made since Microsoft made its initial takeover approach on 1 February.
In trading in Frankfurt, Yahoo's shares were down 20.2% at 14.45 euros ($23.17) by lunchtime.
Analysts said Yahoo must come up with some answers about what it would do next.
"Mr Yang is certainly under a lot of pressure now," said Roland Hirschmueller, an equities trader at German brokerage Baader.
"His days are numbered, if he doesn't manage to come [up] with an alternative strategy," he added.
Legal action
Mr Ballmer, Microsoft's chief executive officer, said the firm had raised its original offer from $44.6bn to $47.5bn (£24.1bn) - $33 per share.
But he added that Yahoo had insisted on at least $53bn, or $37 a share - which was more than Microsoft was prepared to pay.
On Friday, Yahoo's shares closed at $28.67.
"You are going to see a lot of shareholders just throwing in the towel because they are going to realise it's going to take a while for the stock to get back to where it was Friday," said Scott Kessler, an analyst at Standard & Poor's.
Analysts said Yahoo could face legal action from shareholders after rejecting the bid.
Microsoft had wanted to do a deal to be able to compete with Google, which dominates the lucrative market for internet advertising.
This market was worth $40bn in 2007 and is predicted to double to $80bn by 2010.
In his letter to Yahoo's chief executive Mr Yang, which was posted on the Microsoft website, Mr Ballmer said: "We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole.
"Despite our best efforts, including raising our bid by roughly $5bn, Yahoo has not moved toward accepting our offer."
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