Google facing challage from "YAHOO + MIcrosoft"?

After a three-month pursuit, Microsoft said on May 3 that it was abandoning its blockbuster bid to acquire Yahoo.

The collapse of the offer came after Steven A. Ballmer, Microsoft's chief executive, increased the company's bid to $33 a share, or a total of about $47.5 billion, from $29.40 a share. Yahoo's chief executive, Jerry Yang, reportedly told Mr. Ballmer that Yahoo would not accept an offer below $37 a share.

"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer," Mr. Ballmer said. "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."


Microsoft's decision to walk away cast a cloud of uncertainty over Yahoo and its shareholders. The breakdown in the talks sent Yahoo's shares plunging, and Mr. Yang and his team will have to decide how to placate investors.

The company has been exploring alternatives to a marriage with Microsoft, including a partnership in search advertising with its arch rival, Google, which could lift Yahoo's profit and perhaps its stock price. Yahoo has also discussed possible mergers with the AOL unit of Time Warner and the MySpace unit of the News Corporation. The MySpace talks have not been active of late.

Microsoft said it wanted to buy Yahoo to compete more effectively with Google in online search and advertising, two related markets where Google is the runaway leader. Both Microsoft and Yahoo have spent billions trying to best Google in search and advertising, and both have failed so far.

The deal would have instantly redrawn the competitive landscape of the Internet. A combined Yahoo and Microsoft would still trail Google in search and search advertising, but it would have a commanding share in areas like Web e-mail and financial news, and a large share of the traffic to Internet portals. It would also have a large portion of the display advertising market, where Google remains a small player.

Google raised alarm bells, saying the deal would raise a long list of antitrust concerns that need to be examined by policy makers and regulators around the world.

Microsoft-Yahoo deal could make life tough for Google ?
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