Microsoft Corp. is no longer interested in buying all of Yahoo Inc., CEO Steve Ballmer said Wednesday, though he told shareholders that the company would still be "very open" to a collaboration on Internet search. His comments sent Yahoo shares diving more than 20 percent.
Let me be clear," Ballmer said at Microsoft's annual shareholder meeting. "We are done with all acquisition discussions with Yahoo."
Yahoo spurned a $47.5 billion takeover offer from Microsoft in May, and later rejected Microsoft's bid to buy only its search engine. Ballmer has said repeatedly of late that the buyout remains off the table, though a search-related deal is possible.
But Wednesday marked the first time he had renewed that stance since the resignation announced this week by Yahoo CEO Jerry Yang, who had resisted Microsoft's overtures. Yahoo shares rose when Yang said he would step aside, because investors hoped it meant a deal with Microsoft would now be more likely.
Ballmer said the companies are not currently talking about a search deal.
Yahoo shares plummeted $2.41, or 20.9 percent, to close at $9.14, its lowest level since early 2003, on a split-adjusted basis, and well below the $33 per share Microsoft offered in May. Microsoft shares tumbled $1.33 cents, 6.8 percent, to end the session at $18.29, a 10-year low.
Michael McDonald, a shareholder who flew from Atlanta to attend the meeting, blames Microsoft's run at Yahoo for depressing its share price and hopes the software maker doesn't try again.
McDonald, a retired advertising executive, called the race to win in Web search and advertising "the dot-com bubble all over again. The economic period we're in now is going to prove the questionable value of search."
Instead, he'd rather see Microsoft cut employees and expenses, or spend cash to buy business software companies.
"We don't need three Googles," he said.
Some analysts have interpreted Ballmer's public comments about a Yahoo buyout as negotiating posturing, and suspect Microsoft might still want to grab Yahoo at a low price, in hopes of improving their joint position in online search and advertising. However, analysts have also said Microsoft is likely to wait until next year before deciding, giving it time to watch Yahoo's performance and study the antitrust regulatory climate in a new administration in Washington.
In his remarks, Ballmer attempted to reassure shareholders that Microsoft can thrive despite the economic downturn, citing the software maker's long-term research and development spending and new products that mix desktop software and over-the-Internet computing.
When a shareholder, alluding to Microsoft's languishing stock price, asked Ballmer when Microsoft's best years would arrive, the CEO countered that every year is Microsoft's best year.
Then he jokingly added, "If we could get this economic thing headed in the right direction ... I'm not going to pretend we have control over that. You'd better call D.C."
SAN FRANCISCO (AP) -- Yahoo Inc. founder Jerry Yang has never concealed how much he cares about his Internet company.
His emotional attachment is one of the reasons he balked at a $47.5 billion takeover offer from Microsoft Corp. six months ago. The same devotion finally led Yang to conclude he should step aside as chief executive, as the company seeks to bolster its depressed stock price and sagging earnings in an economic downturn that might prove even more wrenching than the dot-com bust of eight years ago.
Yang's surrendering of the CEO reins, announced Monday, won't occur until Yahoo finds a suitable replacement. The Sunnyvale-based company said it is interviewing candidates inside and outside Yahoo in a search led by its chairman, Roy Bostock, and the executive recruitment firm Heidrick & Struggles.
It didn't take long for analysts to conclude Yang's departure will clear the way for a major overhaul that could culminate in Yahoo's sale to Microsoft -- something Yang refused to do in May, to the great irritation of shareholders.
"We still believe Microsoft will eventually own Yahoo," UBS analyst Benjamin Schachter wrote in a research note late Monday. "Jerry moving out of the CEO role may accelerate this."
Microsoft declined to comment Monday.
Although Yang had publicly expressed his desire to remain at the helm, Yahoo's board faced intensifying pressure to cast him aside as the company's shares plunged to their lowest levels since early 2003. The stock fell 19 cents Monday to close at $10.63 -- a fraction of Microsoft's last bid of $33 per share in early May.
Microsoft CEO Steve Ballmer huffily withdrew the offer after Yang sought $37 per share. The negotiating breakdown triggered a shareholder revolt led by billionaire investor Carl Icahn, who called for Yang's ouster in July.
Icahn reached a truce that put him and two allies on Yahoo's 11-member board, but he still has been lobbying for Yahoo to pursue a deal with Microsoft that would either involve selling the company in its entirety or just its search engine, which ranks a distant second to Google Inc. An Icahn spokeswoman said the financier had no comment Monday.
Monday's shake-up comes as no surprise, given the challenges facing Yahoo.
"The shareholders were ready to pick up pitchforks and torches," said technology analyst Rob Enderle. "If Jerry wasn't a founder, he already would have been gone" months ago.
Bostock made it sound as if the change in command had been in the works for some time. "Jerry and the board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level," he said.
Yang, who started working on Yahoo with Stanford University classmate David Filo in 1994, will revert to "Chief Yahoo," a titular role he filled before replacing former movie studio boss Terry Semel as CEO in June 2007. He will also remain on Yahoo's board of directors.
"All of you know that I have always, and will always bleed purple," Yang wrote Monday memo to employees, referring to the company's official color.
Sue Decker, Yahoo's president, is expected to be among the candidates to succeed Yang, although she has been an integral part of the management team that has exasperated the company's shareholders.
Dan Rosensweig, who resigned as Yahoo's chief operating officer, also could be lured back as CEO, or the board could turn to one of its own directors, such as former Viacom Inc. CEO Frank Biondi or former Nextel CEO John Chapple.
Investors appeared to be pleased with the decision to replace Yang, as Yahoo shares climbed more than 4 percent in Monday's extended trading.
Yang, 40, had been pursuing a strategy that he thought would prove Yahoo was worth more than Microsoft was willing to pay, but the rapidly deteriorating economy made a comeback seem increasingly unlikely.
After squandering the opportunity to sell to Microsoft, Yang tried to boost Yahoo's profit by forging an advertising partnership with Google.
But that backup plan fell through two weeks ago when Google walked away from the deal to avoid a court battle with the U.S. Justice Department, which had concluded the partnership would have throttled competition in the online advertising market.
Just a few hours after the Google partnership collapsed, Yang publicly said he thought Microsoft should hook up with Yahoo. But Ballmer threw cold water on the idea the next day by declaring he doubted a deal could be worked out.
Yang had also been exploring a possible acquisition of another fading Internet star, AOL, but most analysts panned the idea as a desperation move that threatened to hurt Yahoo more than it would help.
Although Yang's tenure as CEO is unlikely to be remembered fondly by shareholders, his legacy as an Internet visionary remains secure.
Yahoo's remarkable rise began in 1994 when Yang and Filo began compiling a directory of their favorite Web links while working on their engineering doctorates in a trailer at Stanford University. They initially called their site "Jerry and David's Guide to the World Wide Web," only to later decide to switch to an acronym for "Yet Another Hierarchical Officious Oracle."
Yang and Filo became two of the Internet's first billionaires not long after Yahoo went public in 1996 with fewer than 50 employees on the payroll. At the height of the dot-com boom, Yahoo's market value stood at $130 billion. It was less than $15 billion Monday.
