Yahoo shares fell by 15% on Monday after Microsoft
withdrewits $46.5bn offerfor the search
giant.
The shares fell by $4.30 to $24.37, closing well below
Microsoft's offer of $33 a share. However, the closing share price
was still 27% higher than the $19.18 that shares were trading at
before Microsoft made its bid public in February.
Microsoft raised its initial offer of $31 a share to $33, but
Yahoo demanded $37 a share, which Microsoft was not willing to
pay.
"In our conversations this week, we conveyed our willingness to
raise our offer to $33 per share, reflecting again our belief in
this collective opportunity," Microsoft's CEO, Steve Ballmer told
Yahoo. "Yet it has proven insufficient, as your final position
insisted on Microsoft paying yet another $5bn or more, or at least
another $4 per share above our $33 offer."
Microsoft had threatened
a hostile takeover of Yahoo through a proxy battle but has
decided against it and formally withdrawn its offer.
"From the beginning of this process, our independent board and
our management have been steadfast in our belief that Microsoft's
offer undervalued the company," said Yahoo chairman Roy
Bostock.
Yahoo CEO Jerry Yang said that with the distraction of
Microsoft's unsolicited proposal now behind it, the company would
continue to focus on developing innovative web products.
But analysts said that Yahoo could face a shareholder
backlash if it didn't come up with new products that raised its
share price.
Forrester analyst Charlene Li said, "With the Microsoft
acquisition threat fading, Yahoo has been given a reprieve but it
must explain and execute on a strategy that supports its belief
that the company is worth $37 a share, or face another round of
acquisition attempts and shareholder revolt. Yahoo's three-pronged
strategy of being the starting point, advertising platform for the
web, and openness is sound but it has been muddled due to poor
communication and tactical steps."