As expected and discussed recently, Microsoft (MSFT) did raise its offer for Yahoo! (YHOO) to $33 a share. Also as expected, Yahoo! wanted more. Certainly not expected, Microsoft said see you later before Yahoo! could say "Wait a minute, on the other hand...".

I imagine that right now many Microsoft shareholders and employees are cheering, while some Yahoo! shareholders are considering lawsuits. To not take a $33 a share price to the shareholders will certainly get the lawyers interested. In the end, Ballmer held to his reputation of not messing around, being upfront, and playing tough but fair. He did give a little, but in the end stayed true to his word.

A lot of people were talking about how Microsoft needed this deal, how Ballmer needed this deal, yet he was still not willing to overpay. Walking away may end up being the smartest thing he did. By also sweetening the deal by $5 billion, and deciding to not go hostile, Ballmer has also put Jerry Yang and the Yahoo! board on the defensive. Monday trading should be interesting. Expect Microsoft to make a play for AOL (TWX) or MySpace (NWS) in due time.

Disclosure: None

David Enke

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This article has 12 comments:

  •  
    May 04 04:08 PM
    what price do u think msft will open tommorrow?any ideas?
  •  
    May 04 04:49 PM
    As a MS shareholder I am very obviously delighted by this news. Ballmer actually played this one correctly. I am looking forward to MS buying Yahoo in a year at half of yesterday's offer.
  •  
    May 04 05:04 PM
    Msft stock will go up - $30+
  •  
    May 04 05:24 PM
    30+ is not really anything .unless it goes to the mid 30 like 35 +
  •  
    May 04 05:49 PM
    I *hope* MSFT buys AOL (minus the useless access business) making TWX go up. I have held that sucker for way too long now. :)
  •  
    May 04 09:08 PM
    Microsoft opens at 30.50, Yahoo at 23. MSFT will be held back by continuing thoughts that they will still do a deal with YHOO. YHOO will not collapse for the same reason.
  •  
    May 04 09:53 PM
    MSFT should be up 5%
  •  
    May 04 09:53 PM
    YHOO 21 or less
  •  
    May 05 12:22 AM
    i bought 2000 shares of microsoft at 29.25 knowing it was undervalued. lets see, if it goes to 31.25 that's 4 grand profit. 32.25 is 6 grand etc. i love bill gates! now i just have to figure out when to cash in.
  •  
    May 05 01:14 PM
    rich168: Monday, May 5, 2008, as of 1:00pm: Yahoo stock is at $24.87. It's headed UP.
  •  
    May 05 03:29 PM
    msft has been asleep for more than 8 years. a buyout of yhoo would put msft back to sleep for another 8 years. yhoo's rejection is the best thing that could have happened aside from ballmer's well deserved resignation (release).
  •  
    May 05 04:26 PM
    Good article. Ballmer finally grew up. Didn't overpay. Just as Welch refused to overpay for Honeywell, especially when learning he couldn't "get" what he wanted. Ballmer made a similar comment about Yahoo dumping off the Google stuff that made Yahoo worth the $.

    Good for Ballmer!
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