As reported by the Wall Street Journal, Microsoft has retracted its offer for Yahoo in a surprise change of events. It was widely suspected before that they would be “going hostile” with their original $31/share bid for Yahoo (NYSE: YHOO), and after some negotiations this weekend… Microsoft CEO Steve Ballmer decided to walk.

I had talked about the deal way back on March 9th in a post about the possible takeover. But I guess things weren’t meant to be, I see this as a win-win-win situation as Microsoft doesn’t throw away money, Yahoo doesn’t get destroyed form the inside out, and MSFT shareholders keep their sanity.

From the Wall Street Journal:
“Microsoft Saturday released a letter from Chief Executive Steve Ballmer to Yahoo CEO Jerry Yang saying that Microsoft had said it was willing to raise its offer to $33 a share for Yahoo, but Yahoo demanded at least $4 per share more.“

So where does Yahoo get off demanding so much money, eh? These guys are the laughing stock of the financial world now because they are demanding an unprecedented amount of money… YHOO stock isn’t worth $20…. let alone almost twice that! The drivers for growth in this company are all gone stale. Google, and heck, even Microsoft are tearing them apart on the internet, and there’s really nothing beyond that for Yahoo.

What was most intriguing was that Ballmer actually upped the bid to Yahoo’s CEO Jerry Yang to $33 per share, which was really not anticipated. A lot of people, myself included, see Ballmer as the kind of guy who will make his demand and never back down… kind of a ruthless conqueror of sorts. The fact that he was able to bend and raise the bid should have been enough for Yahoo to accept. I feel like they are dooming themselves and will never get their stock back to that much value.

Wall Street analysts have estimated that shares of Yahoo would fall to $20-$25 if Microsoft walked… I am thinking they are spot on. I’m not so sure what Yahoo is anticipating as far as movements go in order to reposition themselves as market leaders… but you hear names like Google and Time Warner thrown around quite a lot. We’ll have to see what happens.

Maybe if Microsoft acquired Yahoo, bloggers would have seen some insanely cheap advertising deals in a competition scramble… but hey, I see this as a win. This Microsoft empire shouldn’t be getting that much bigger any time soon, and I don’t think anybody wants them having that added pricing power.

-The Net Fool

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