- Microsoft CEO Ballmer said the software giant decided to walk away from a bid because Yahoo would become 'undesirable' if it formed an alliance with Google (Fortune)
Google gains on Yahoo fallout-Search engine eyed as Yahoo partner in fending off Microsoft's bid; Google shares spike 3.9% (CNN Money)
- Yahoo falls on Microsoft withdrawal, Countrywide sinks. Shares of Yahoo Inc. tumbled in premarket trading Monday after Microsoft Corp. withdrew its offer to buy the company. Yahoo fell 21.8 percent to $22.43, while Microsoft rose 2.3 percent to $29.90. (AP)
First, a Google-Yahoo tieup would encourage advertisers to use Google as opposed to Panama, Yahoo's own search system. Not only would that fragment Yahoo's search advertising strategies, it would also "undermine the reliance on your display advertising business to fuel future growth," Ballmer wrote.
Ballmer said there were a host of other problems. Yahoo would suffer an engineering brain drain. There would also be regulatory issues that Microsoft would not be willing to "inherit." Microsoft (MSFT, Fortune 500) has argued that a Yahoo-Google deal would give the two a 90% dominance in search advertising, and make an acquisition difficult to pass through regulators.
Finally, a Google-Yahoo partnership would make Google even more dominant and force other search providers to rely on Google. Microsoft worries that a deal with Google not only would reduce competition, it could possibly force others to switch to using Google as well. Microsoft has repeatedly argued that it cannot catch up to Google and compete in the online ad market without merging with the second-largest player, Yahoo.(Fortune)