Microsoft pulls out of Yahoo takeover

Microsoft chief executive Steve Ballmer says he cannot justify paying $US37 a share for Yahoo, and has all but given up his attempt to acquire the search engine giant.

On Saturday, Ballmer increased Microsoft’s offer from $US29.40 to $US33 a share, but Yahoo co-founder Jerry Wang rejected that price and held out for a bigger deal.

Ballmer was having none of it. “Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer,” he said in a statement. “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.”

Analysts have praised Microsoft for not overpaying for Yahoo, although question marks remain over how Microsoft plans to make inroads into Google’s dominance of the search engine sector.

But commentators have been scathing about Wang and his management team for refusing to pounce on Microsoft’s increased offer, and Yahoo’s shares are expected to fall heavily when they are traded tonight.

Ironically, that could allow Microsoft to launch another bid at a lower price in the coming months.