Microsoft spurns Yahoo, which turns to Google

SAN FRANCISCO - Yahoo Inc.'s efforts to revive takeover talks with Microsoft Corp. have reached a dead end, setting the stage for the Internet pioneer to turn over a piece of its advertising platform to online search leader Google Inc.

The news disclosed yesterday caused Yahoo shares to plunge more than 10 percent as investors abandoned hope that Microsoft would renew a five-month quest to buy the Sunnyvale, Calif., company.

Yahoo tried to renew the discussions at Microsoft's last offer of $47.5 billion, or $33 per share, but the software-maker wasn't willing to bid that much again, according to a statement released yesterday.

Microsoft chief executive Steve Ballmer had withdrawn his oral offer of $47.5 billion after Yahoo CEO Jerry Yang asked for $37 per share in a May 3 meeting at a Seattle airport.

Shortly after that breakdown, Microsoft tried to persuade Yahoo to sell its online search operations instead.

But Yahoo concluded that its search engine - the Internet's second most popular behind Google - was too important to sell piecemeal.

Yahoo said Microsoft, in a meeting Sunday, "unequivocally" rejected the notion of buying the entire company.

In its statement, Microsoft asserted that its plan involving the purchase of Yahoo's search operations would have been worth at least $33 per share to Yahoo.

Yahoo now has to find a way to minimize the damage to its stock, which dropped $2.63, or 10.1 percent, to close at $23.52.

Yahoo said after markets closed yesterday that it will let Google sell some of the advertisements it runs alongside Web searches. The deal may add $800 million to sales a year, the company said in a statement.

In a two-week trial completed in April, Google demonstrated that its superior technology could generate higher revenue from text-based ad links displayed alongside some of Yahoo's search results.