Yahoo: Microsoft Talks Done, No Deal Coming

Yahoo today said its talks with Microsoft focusing on acquiring all or part of the company are officially over -- a position that Microsoft appears to be at least partially disputing.

"Discussions with Microsoft regarding a potential transaction -- whether for an acquisition of all of Yahoo or a partial acquisition -- have concluded," Yahoo said in a press release posted this afternoon.

According to Yahoo, at a meeting this weekend between Redmond and several Yahoo board members, unnamed "Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo, even at the price range it had previously suggested."

Yahoo said it turned down Microsoft's alternate offer to acquire Yahoo's search business because "such a transaction would not be consistent with the company's view of the converging search and display marketplaces" and "would leave the company without an independent search business that it views as critical to its strategic future."

However, Microsoft still appears to be interested in that alternative offer. In a statement posted on its Web site in response to the Yahoo press release, Redmond said in part, "As stated on May 3 and reiterated on May 18, Microsoft was not interested in rebidding for all of Yahoo!. Our alternative transaction remains available for discussion."

Microsoft did not comment directly on the talks held this weekend.

According to a report today by the Wall Street Journal, Yahoo will now pursue its earlier plan to form a search advertising partnership with Google -- one that the WSJ said may be announced today.

News that the talks have broken down caused Yahoo's share prices to drop sharply.

Billionaire investor Carl Icahn has not yet publically commented on the announcement. Icahn is orchestrating a takeover of Yahoo's board by promoting his own slate of candidates with the aim of facilitating a Microsoft takeover. Ballots for the new board went out this week.

On Tuesday, Icahn said in an interview that shareholders will be looking to hold individual Yahoo board members accountable for any roadblocks to the acquisition deal. One of those roadblocks is an employee severance plan added by Yahoo's management that potentially imposes costs on Microsoft should Yahoo be acquired.

About the Author

Becky Nagel is executive editor, Web Initiatives for the 1105 Redmond Media Group and the editor of Redmondmag.com.

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