Microsoft has decided to withdraw its three-month-old offer to buy Yahoo, as expressed in a formal letter from Microsoft chief executive Steve Ballmer to Yahoo chief executive Jerry Yang.

"The companies had finally engaged in merger talks this week and appeared closer than ever to a deal Friday, but they still remained billions of dollars apart in their assessment of Yahoo's worth. Ballmer said today that the company had raised its buyout price to $33 a share from the initial $31 offered, which added $5 billion to the deal that was initially worth $44.6 billion.

That would have represented a 70% premium over Yahoo's closing stock price on Jan. 31, the night that Redmond, Wash.-based Microsoft made its unsolicited offer.

But in recent talks Yahoo had insisted on receiving at least $5 billion more than that, or at least $37 a share, which Microsoft was unwilling to pay, Ballmer wrote in a letter to Yang.

Ballmer said he had decided against launching a hostile bid for Sunnyvale, Calif.-based Yahoo, including trying to take control of the company's board and offering the deal directly to shareholders. He said Yahoo had signaled that it would take action that could prolong such a proxy fight and make the company less valuable to Microsoft, including striking a partnership with Google Inc. in which the search giant would deliver ads alongside many of Yahoo's search results."

Image courtesy of The Los Angeles Times

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