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Ballmer on Yahoo!: Microsoft prepared to walk away
"Time is money"

By Reuters

Published: Thursday 24 April 2008

Microsoft is prepared to walk away from its $43.6bn bid for Yahoo! if the two sides can't agree on a price, chief executive Steve Ballmer said on Wednesday.

Speaking at a technology conference near Milan, Ballmer said Yahoo!'s better-than-expected first-quarter results, reported on Tuesday, have not changed Microsoft's view of Yahoo!'s value.

Microsoft sees Yahoo! as a way to compete with arch-rival Google in the internet search and advertising arena - but has limits to what it will pay to get a deal done.

Ballmer said: "We're prepared to move forward without a merger with Yahoo!. We think the best way to move forward quickly [and gain critical mass against Google] is to come together with Yahoo!."

He said: "Hopefully that works. But, if it doesn't, we go forward. Time is money. We made [that] clear in the last letter we sent."

In that letter, Ballmer set a deadline of this Saturday for Yahoo!'s board to accept a deal with Microsoft or face a lower bid, which Microsoft would take directly to Yahoo!'s shareholders. Yahoo!'s board of directors has said Microsoft's cash-and-stock offer significantly undervalues the company.

Analysts downplayed the possibility of Microsoft walking away from the deal.

Marianne Wolk, analyst with Susquehanna Financial Group, wrote in a report: "It is unlikely Microsoft will walk away, as the company has a strategic imperative to establish a more significant presence in internet advertising."

The value of Microsoft's offer for Yahoo! has fallen to $30.36 per share from $31 because of a decline in Microsoft shares. In order to regain the bid's full value, Microsoft's stock would have to rise to $32.6, the closing share price on 29 January, a day before Microsoft presented its unsolicited offer to Yahoo!'s board.

Shares of Microsoft were up 98 cents, or 3.24 per cent, to $31.23 in afternoon Nasdaq trade. The company is to report its results for the March quarter on Thursday.

Yahoo! shares were below Microsoft's offer, down 46 cents to $28.08 on the Nasdaq.

Asked whether Microsoft could make a bid for Google, Ballmer said he did not think Google would be interested and that such a bid would raise regulatory issues. Yahoo! and Microsoft rank second and third in web search, respectively. Google ranks number one.