With Microsoft now walking away from its unsolicited bid for Yahoo, new details are emerging as to just how bizarre these negotiations -- or lack thereof -- have been since Microsoft first made the deal public three months ago.
Piecing together a time-line with sources familiar with the negotiations, it appears that Yahoo spent much of its time ignoring Microsoft's overtures.
Sources said weeks went by with no response of any kind from Yahoo after the bid became public. It was that lack of response that sources close to Microsoft say, led Microsoft CEO Steve Ballmer to issue an ultimatum on April 5, giving Yahoo three weeks to come to the table to negotiate.
A few days later, Yahoo would announce its limited ad-sharing partnership with rival Google to show that Yahoo was considering multiple options in case the Microsoft offer ever went away.
Instead, that deal immediately raised antitrust concerns by the U.S. Justice Department, something that would weigh heavily on Ballmer just a few weeks later, as indicated in his note to Yahoo that Microsoft was walking from the deal.
On April 15, executives from both sides met in person to discuss the social and cultural challenges of blending these two companies. But little time at that meeting was spent on a value of the deal.
According to people familiar with the matter, excutives at Microsoft were in apparent disbelief at the lack of negotiation of any kind, whether on the phone or face to face. As of April 18, Yahoo's board of directors was asking for $40 a share, a source says.
When Yahoo reported lackluster earnings on April 22, a source says, the report emboldened Microsoft even further to stick to its original $31 a share offer.
Frustrations and negotiations took on a new sense of urgency on April 26, as the Microsoft deadline passed with no meaningful communication of any kind.
With Microsoft prepared to end the whole process then, Yahoo CEO Jerry Yang and Chairman Roy Bostock suggested to Microsoft that it shouldn't walk from the deal; that maybe Microsoft would be interested in acquiring just Yahoo's search business. Microsoft rebuffed the suggestion.
Two days later, Jerry Yang would tell Microsoft that he'd be willing to come down to $38 a share. Microsoft said the price was still too high, according to sources.
On May 2nd, Microsoft chief counsel Brad Smith called Yahoo's bankers and said Microsoft was prepared to move to $33 a share to get the deal done friendly and quickly.
Here's the strange part: once again, Yahoo apparently completely ignored that offer with no call back.
A source close to Microsoft says no questions of any kind were asked, such as whether the $33 a share would be all cash, or whether there would be a stock component. There was simply no communication.
A source close to Microsoft says on Saturday, May 3, both Yahoo Co-Founders Jerry Yang and David Filo flew to Seattle to meet with Steve Ballmer and Kevin Johnson personally. They were there to deliver a message: that Yahoo's board was willing to come down to $37, but that Yang's and Filo's price was still at $38.
Based on the personal talks Microsoft had had with various executives and bankers at Yahoo during the preceding week, and based on the unusual nature of the co-founders sticking to a price that was apparently different from the company's own board of directors, a source says Ballmer became convinced that if the deal went hostile, Yahoo would prefer to "destroy its brand" rather than let this deal move forward. Ballmer pointed out these misgivings in his letter to Yang, indicating that the potential partnership with Google was an example of the self-destructive kinds of arrangements Yahoo was apparently willing to engage in instead of entering into meaningful talks with Microsoft to get a deal done.
CNBC has left a message with Yahoo executives for a reaction and their side of the story.
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