Yahoo Says Microsoft No Longer Keen to Merge


Yahoo Chief Executive Jerry Yang said on Wednesday that a potential deal with Microsoft has
tremendous power, but that the software giant appears no longer interested in a full merger.

In his most public comments to date about his thinking on the four-month-old on-again, off-again Microsoft takeover saga, Yang signaled that the companies remain open to a potential deal, but said Microsoft had ruled out a merger for now.

Earlier this month, Microsoft walked away from a proposal to acquire Yahoo for $47.5 billion, or $33 per share, after Yahoo rebuffed its offer, saying it would only settle for $37 a share. Then, in mid-May the two companies said they had begun discussions on an unspecified deal that is short of a merger.

"We did not walk away from that proposal. Microsoft did," Yang said during an on-stage interview at the D: All Things Digital conference taking place near San Diego on Wednesday. He said he had felt that a combination with Microsoft would have had a "tremendous amount of power."

"Microsoft is no longer interested in buying the company, and we are talking about other things. We definitely have to understand what they're proposing ... they clearly have an interest in Yahoo, and we need to understand more," he said.

In an interview with Wall Street Journal technology columnist Walt Mossberg, Yang said a merger with Microsoft would involve a variety of issues beyond price and discussions had never thoroughly explored such non-price hurdles, including regulatory issues.

Yahoo President Susan Decker, appearing alongside Yang on stage, said that price had always been the biggest barrier to reaching agreement on a deal with Microsoft.  "We never got through the price door ... once we could have gone through it, then other issues could have been discussed," she said. 

Yang argued that a competing deal between Yahoo and Google made sense but that no deal had been reached. Last month, the companies conducted a two-week test where Yahoo hired Google to run advertising sales alongside Yahoo search results.

"It makes a lot of sense, but if we do something, we will talk about it," Yang said, adding that the "level at which Yahoo can fully partner with Google has been fully appreciated by the marketplace."

In the wake of the breakdown of the Microsoft takeover talks, Yang defended his one year on the job as CEO and said he believed he was the right person to lead Yahoo into a new era of growth, even if the company must invest heavily to do so. "I do think I am the best person to lead Yahoo," Yang said.

He compared conflicting media reports about who was responsible for the failure to reach a deal to a romance gone bad: "It's like you break up with your girlfriend in high school ... it pretty quickly becomes 'he said, she said'."

Yang reiterated what the company has been saying over the past year: that it "has a lot of work to do" and needs to make investments to reach management's vision of a new Yahoo.

Its strategy involves tapping the underlying social connections of its roughly 500 million monthly visitors to become a "must buy" for advertisers.

One audience member complained to Yang she was having a hard time finding Yahoo mobile services on U.S. smartphones.

She was apologetic for drifting off the topic of Microsoft. Yang was only too happy to answer: "Of all the questions I have been getting for the past four months, I am glad to get a technical question."