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Yahoo shares plunge after Microsoft’s withdrawal

Yahoo’s shares tumbled by as far as 20% Monday morning after talks with Microsoft ended. The Redmond giant increased it’s bid from the original $31/share back in January to $33. Yahoo CEO Jerry Yang reportedly was asking $37; Microsoft walked away from the deal.

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It recovered a little bit after end of trading day and was hovering around $24.50, down by $4.25 from last Friday’s $28.75. Some expect that the stock prices could goes down as low as the pre-offer level of about $19.

Yahoo will also be facing lawsuits from shareholders who wanted the deal to go thru. Microsoft, on the other hand, gained 2.6% after the announcement (market was obviously happy MSFT is not overpaying for YHOO). The biggest winner appears to be Google (up by 2.2%) which had a trial search advertising deal with Yahoo a few weeks back.

With the $47.5 billion acquisition fund, Microsoft can actually buy a whole slew of other profitable tech companies.

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  • Yahoo and Microsoft both have a ‘technical’ company culture adapted to creating profit from having a clear technical advantage in a given market place. Yahoo destroy behind in this regard and although Microsoft may have a marginal technical advantage over Yahoo, it clearly has not been able to exploit it, because its management does not have the commercial culture that comes with the rigid hack and change necessary in a market. On the other side, Google has an openly commercial competitive culture.