“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,” said Steve Ballmer, CEO of Microsoft, in a statement.
Ballmer said in a letter to Jerry Yang, withdrawing the deal proposal, that he was also concerned about Yahoo’s pending deal with Google.
“In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us for a number of reasons,” he said.
Ballmer said it would undermine Yahoo’s own strategy and long-term viability by encouraging advertisers to use Google as opposed to Yahoo’s Panama paid search system. As a result, he said, it would also be more difficult to retain the talented engineers working on its advertising systems.
“In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit,” Ballmer said. It would also consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace, he said.
Ballmer said such a deal would effectively enable Google to set the prices for key search terms on both its and Yahoo’s search platforms and, in the process, raise prices charged to advertisers on Yahoo.