Microsoft withdraws bid for Yahoo

Software maker walks away after it says it
raised its offer to $46 billion – says economics demanded by Yahoo ‘do
not make sense.’

NEW YORK (CNNMoney.com) — Microsoft Corp.’s pursuit of Yahoo Inc.
ended abruptly Saturday when the world’s largest software maker
withdrew a sweetened $46 billion offer and said it would not make a
hostile bid for the Internet company.

Microsoft said the
breakdown came despite having raised the bid to $33 a share, or $5
billion above what it said was the current value of the offer and a 70%
premium compared to its original offer.

The offer was valued at $31 a share when it was made in January. Yahoo stock closed Friday at $28.67 a share.

“After careful consideration, we believe the economics demanded by Yahoo (YHOO, Fortune 500) do not make sense for us,” said Microsoft (MSFT, Fortune 500) CEO Steve Ballmer.

In
a letter to Yahoo Chief Executive Jerry Yang, Ballmer said that Yahoo
wanted at least another $4 a share, or $5 billion in value, added to
the deal, bringing it to at least $37 a share.

Ballmer also told Yang that taking the offer directly to shareholders would not be “sensible.”

“This
approach would necessarily involve a protracted proxy contest and
eventually an exchange offer,” Ballmer wrote. “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.”

Ballmer said he was concerned that a further collaboration between Yahoo and Google (GOOG, Fortune 500) – which he called “the dominant search provider” – would make an acquisition undesirable for several reasons.

Yahoo officials indicated their pleasure with the end of the Microsoft bid.

“Our
independent board and our management have been steadfast in our belief
that Microsoft’s offer undervalued the company and we are pleased that
so many of our shareholders in expressing that view,” Yahoo chairman
Roy Bostock said.

Yang, in the same statement, called the
Microsoft bid a “distraction” and said that Yahoo will now focus “on
executing the most important transition in our history so that we can
maximize our potential.”

Microsoft: We’ll do it without Yahoo

Microsoft indicated that it will proceed with a Web advertising strategy.

“We
have a talented team in place and a compelling plan to grow our
business through innovative new services and strategic transactions
with other business partners,” Ballmer said. “While Yahoo would have
accelerated our strategy, I am confident that we can continue to move
forward toward our goals.”

Both Microsoft and Yahoo have struggled to compete with Google for billions of advertising dollars shifting to the Web.

A
marriage between Microsoft and Yahoo had been widely considered by
analysts as inevitable. “As we have indicated since 2/1, we think MSFT
will eventually acquire YHOO at a price not materially above the value
of its initial offer,” wrote Scott Kessler, an analyst with Standard
& Poor’s, in a report earlier this week.

Microsoft fears that
Google’s acquisition of DoubleClick – the world’s biggest online ad
server company and big player in the increasingly lucrative market for
online display ads – will allow the search giant to seize an even
bigger portion of the ad market as Microsoft’s MSN falls further behind.

Microsoft
made a public offer to buy Yahoo on Jan. 31, two days after the
Internet portal reported weak quarterly earnings and a disappointing
outlook for 2008.

Yahoo was an impressive target. It is one of
the last independent Internet companies with massive scale. In March,
it was the top-ranked site in the United States with 139 million unique
visitors, according to comScore, which tracks Web audiences. Google was
second and Microsoft was third.

What might have been

A Microsoft-Yahoo combo could have offered even greater scale and attracted more advertisers.

None
of that persuaded Yahoo, however. Though the value of the company’s
stock has risen more than 40% since Microsoft made its offer, its board
said the proposal “substantially undervalues” the company.

Throughout
the past three months, Yahoo had said it was not opposed to a merger if
Microsoft offered the right price. But it also sought alternatives.
When no white knights came to the rescue, Yahoo in recent months
pursued other tieups with Time Warner (TWX, Fortune 500) (parent of CNNMoney.com), News Corp. (NWS, Fortune 500) and Google.

But any involvement with Google could raise antitrust issues.

Yahoo’s
two-week test running Google’s search ads caught the attention of the
U.S. Justice Department. Microsoft General Counsel Brad Smith said a
Yahoo-Google collaboration would “consolidate over 90% of the search
advertising market in Google’s hand.”

Sen. Herbert Kohl, D-Wis.,
the chairman of Senate Judiciary Committee’s antitrust panel, said last
month that “should there be moves to make this agreement permanent, we
will examine it closely … to ensure that it does not harm
competition.”

On Saturday, Ballmer struck a generally cordial tone with Yang, even as he criticized Yahoo for rejecting Microsoft’s offer.

“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,” Ballmer wrote. “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,” Ballmer added. “Thank you again for the time we have spent together discussing this.”

Scott Moritz and Yi-Wyn Yen of Fortune contributed to this article.

One boy, one girl — one dorm room

(AP) — Erik Youngdahl and Michelle Garcia share a dorm room at Connecticut’s Wesleyan University. But they say there’s no funny business going on. Really. They mean it.

They have set up their beds side-by-side like Lucy and Ricky in “I Love Lucy” and avert their eyes when one of them is changing clothes.

“People are shocked to hear that it’s happening and even that it’s possible,” said Youngdahl, a 20-year-old sophomore. But “once you actually live in it, it doesn’t actually turn into a big deal.”

In the prim 1950s, college dorms were off-limits to members of the opposite sex. Then came the 1970s, when male and female students started crossing paths in coed dormitories. Now, to the astonishment of some baby boomer parents, a growing number of colleges are going even further: coed rooms.

At least two dozen schools, including Brown University, the University of Pennsylvania, Oberlin College, Clark University and the California Institute of Technology, allow some or all students to share a room with anyone they choose, including someone of the opposite sex. This spring, as students sign up for next year’s room, more schools are following suit, including Stanford University.

As shocking as it sounds to some parents, some students and schools say it’s not about sex.

Instead, they say the demand is mostly from heterosexual students who want to live with close friends who happen to be of the opposite sex. Some gay students who feel more comfortable rooming with someone of the opposite sex are also taking advantage of the option.

“It ultimately comes down to finding someone that you feel is compatible with you,” said Jeffrey Chang, a junior at Clark in Worcester, Massachusetts, who co-founded the National Student Genderblind Campaign, a group that is pushing for gender-neutral housing. “Students aren’t doing this to make a point. They’re not doing this to upset their parents. It’s really for practical reasons.”

Couples do sometimes room together, an arrangement known at some schools as “roomcest.” Brown explicitly discourages couples from living together on campus, be they gay or straight. But the University of California, Riverside has never had a problem with a roommate couple breaking up midyear, said James C. Smith, assistant director for residence life.

Most schools introduced the couples option in the past three or four years. So far, relatively few students are taking part. At the University of Pennsylvania, which began offering coed rooms in 2005, about 120 out of 10,400 students took advantage of the option this year.

At UC Riverside, which has approximately 6,000 students in campus housing, about 50 have roommates of the opposite sex. The school has had the option since 2005.

Garcia and Youngdahl live in a house for students with an interest in Russian studies. They said they were already friendly and didn’t think they would be compatible with some of the other people in the house.

“I had just roomed with a boy. I was under the impression at the time that girls were a little bit neater and more quiet,” Youngdahl said. “As it turns out, I don’t see much of a difference from one sex to the other.”

Garcia, 19, admitted: “I’m incredibly messy.”

Parents aren’t necessarily thrilled with boy-girl housing.

Debbie Feldman’s 20-year-old daughter, Samantha, is a sophomore at Oberlin in Ohio and plans to room with her platonic friend Grey Caspro, a straight guy, next year. Feldman said she was shocked when her daughter told her.

“When you have a male and female sharing such close quarters, I think it’s somewhat delusional to think there won’t be sexual tension,” 52-year-old Feldman said. “Maybe this generation feels more comfortable walking around in their underwear. I’m not sure that’s a good thing.”

Still, Feldman said her daughter is partly in college to learn life lessons, and it’s her decision. Samantha said she assured her mom that she thinks of Caspro as a brother.

“I’m really close to him, and I consider him one of my really good friends,” she said. “I really trust him. That trust makes it work.”

Copyright 2008 The Associated Press