Yahoo says it won't sell its search biz to Microsoft

Yahoo has decided not to sell its search business to Microsoft.
Written by Mary Jo Foley, Senior Contributing Editor

Yahoo has decided not to sell its search business to Microsoft.

From a Yahoo statement issued June 12:

Yahoo "today announced that discussions with Microsoft regarding a potential transaction -- whether for an acquisition of all of Yahoo! or a partial acquisition -- have concluded....

"With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders."

From Yahoo's full statement, it sounds like the No. 2 search player made one last-ditch attempt to sell the entire company to Microsoft -- an offer Microsoft rebuffed on June 8.

"The conclusion of discussions follows numerous meetings and conversations with Microsoft regarding a number of transaction alternatives, including a meeting between Yahoo! and Microsoft on June 8th in which Chairman Roy Bostock and other independent Board members from Yahoo! participated. At that meeting, Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested."

No counter-statement is available yet yet from Microsoft. For the first time since Yahoo-Microsoft negotiations became public this year, Yahoo beat Microsoft out of the gate with a PR statement.

Update: Here's Microsoft's statement on the talks breaking down:

“In the weeks since Microsoft withdrew its offer to acquire Yahoo!, the two companies have continued to discuss an alternative transaction that Microsoft believes would have delivered in excess of $33 per share to the Yahoo! shareholders. This partnership would ensure healthy competition in the marketplace, providing greater choice and innovation for advertisers, publishers and consumers. “As stated on May 3rd and reiterated on May 18th Microsoft was not interested in rebidding for all of Yahoo!. Our alternative transaction remains available for discussion.”

I can't say I'm surprised Yahoo decided not to sell off just its search unit. Yahoo needs search to fuel the rest of its businesses.

So now what will Microsoft do to try to grow its search business? Suggestions? Thoughts? Wishful thinking?

Update No. 2: A few hours after Yahoo announced talks with Microsoft were terminated, Yahoo unveiled an ad/search partnership with Google. I'd say it's safe to say we now know one thing Microsoft will do next: I'd bet the Redmondians will be agitating (behind the scenes and/or publicly) to get the Yahoo-Google deal tabled by antitrust regulators.

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