May 3, 2008
Mr. Jerry Yang
CEO and Chief Yahoo
701 First Avenue
Sunnyvale, CA 94089
over three months, we have reached the conclusion of the process
regarding a possible combination of Microsoft and Yahoo!.
first want to convey my personal thanks to you, your management team,
and Yahoo!’s Board of Directors for your consideration of our proposal.
I appreciate the time and attention all of you have given to this
matter, and I especially appreciate the time that you have invested
personally. I feel that our discussions this week have been
particularly useful, providing me for the first time with real clarity
on what is and is not possible.
I am disappointed that Yahoo! has
not moved towards accepting our offer. I first called you with our
offer on January 31 because I believed that a combination of our two
companies would have created real value for our respective shareholders
and would have provided consumers, publishers, and advertisers with
greater innovation and choice in the marketplace. Our decision to offer
a 62 percent premium at that time reflected the strength of these
In our conversations this week, we conveyed our
willingness to raise our offer to $33.00 per share, reflecting again
our belief in this collective opportunity. This increase would have
added approximately another $5 billion of value to your shareholders,
compared to the current value of our initial offer. It also would have
reflected a premium of over 70 percent compared to the price at which
your stock closed on January 31. Yet it has proven insufficient, as
your final position insisted on Microsoft paying yet another $5 billion
or more, or at least another $4 per share above our $33.00 offer.
after giving this week’s conversations further thought, it is clear to
me that it is not sensible for Microsoft to take our offer directly to
your shareholders. This approach would necessarily involve a protracted
proxy contest and eventually an exchange offer. Our discussions with
you have led us to conclude that, in the interim, you would take steps
that would make Yahoo! undesirable as an acquisition for Microsoft.
regard with particular concern your apparent planning to respond to a
“hostile” bid by pursuing a new arrangement that would involve or lead
to the outsourcing to Google of key paid Internet search terms offered
by Yahoo! today. In our view, such an arrangement with the dominant
search provider would make an acquisition of Yahoo! undesirable to us
for a number of reasons:
your apparent plan to pursue such an arrangement in the event of a
proxy contest or exchange offer leads me to the firm decision not to
pursue such a path. Instead, I hereby formally withdraw Microsoft’s
proposal to acquire Yahoo!.
We will move forward and will
continue to innovate and grow our business at Microsoft with the
talented team we have in place and potentially through strategic
transactions with other business partners.
I still believe even
today that our offer remains the only alternative put forward that
provides your stockholders full and fair value for their shares. By
failing to reach an agreement with us, you and your stockholders have
left significant value on the table.
But clearly a deal is not to be.
Thank you again for the time we have spent together discussing this.
Steven A. Ballmer
Chief Executive Officer