Throughout Microsoft Talks, Yahoo Appeared Unwilling to Sell

By Peter Whoriskey
Washington Post Staff Writer
Monday, May 5, 2008

In the three months after Microsoft launched its bid for Yahoo, the two sides met repeatedly to negotiate. But Microsoft executives and bankers often sensed that Yahoo chief executive and co-founder Jerry Yang was never interested in reaching a deal.

The clearest indication came on April 15, 10 weeks into the process, during a meeting in Portland, Ore., a neutral site. Yahoo had argued that Microsoft's offer of $31 a share, or $44.6 billion, was too low.

So what price, the Microsoft negotiators asked, did Yahoo want?

"Yahoo said, 'We don't have a price,' " according to a source familiar with the negotiations. "Honestly, I think they just wanted the company to stay independent."

The dealings between the two companies, which ended Saturday with Microsoft withdrawing its bid, were marked by a reluctance by Yahoo reach an accord, according to two sources familiar with the negotiations.

Those sources spoke only on background because of the secrecy surrounding the meetings.

Yang and his team reportedly celebrated Microsoft's decision to walk away from the negotiations on Saturday. But a third source familiar with the negotiations warned against concluding that Yang was adamantly opposed to a deal.

"To say Jerry was out there saying 'Over my dead body' is just wrong," according to that source. "They said no to a bad deal -- that's what happened."

Microsoft's withdrawal is unlikely to end the jockeying in what many observers said will be a long-running battle for dominance in online computing, and particularly in online advertising.

Microsoft's bid for Yahoo marked its most aggressive attempt to catch up to Google, the dominant player in those fields based on its preeminence in search-based advertising.

By walking away from the Yahoo deal, Microsoft can now spend the roughly $50 billion it had allotted for the deal to other means of gaining a foothold in Internet services. Microsoft could pursue the acquisition of other Web companies, for example.

"We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners," Ballmer said in a statement on Saturday. "While Yahoo! would have accelerated our strategy, I am confident that we can continue to move forward toward our goals."

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