Yahoo chief Jerry Yang signaled a more open stance towards Microsoft late yesterday, saying he had been seeking common ground when the software maker abruptly ended deal talks.
Mr Yang said in an interview that he had "mixed feelings" about the weekend outcome, after investors showed their disappointment over the break-up of negotiations by sending Yahoo shares down 15 per cent.
"We were negotiating a way to find common ground and then on Saturday they chose to walk away," said the 39-year-old co-founder of the pioneering Internet company. "They started it and they walked away."
Asked if Yahoo would still leave a door open for Microsoft to return, Mr Yang said: "If they have anything new to say, we would be open. ... I am more than willing to listen."
After three months of negotiations, Microsoft chief executive Steve Ballmer raised his offer for Yahoo to $33 per share from an initial $31, for a total deal value of about $47.5 billion.
Mr Yang held out for $37 per share, saying that even the sweetened offer did not value Yahoo properly for its web search advertising technology, its prominence in selling display ads and its lucrative overseas holdings.
Some analysts said Yahoo shares, which dropped $4.30 to end at $24.37 yesterday, could have fallen 30 per cent to closer to $19.18, its price before Microsoft made its bid public on February 1st. But the descent was cushioned by investors who are betting Microsoft will eventually come back to the table.
"This is going to play out over the next several months and there is still a chance Microsoft will buy the company for somewhere around $33 a share," said Todd Dagres, general partner at venture capital fund Spark Capital. "What Microsoft is hoping is that Yahoo shareholders get militant."
Shares of Microsoft rose initially on investor relief that it was not paying billions more for Yahoo, though the stock ended down slightly amid concerns about how the software maker would develop its Web strategy in the face of a dominant Google.
"I think $33 was fairly generous for Yahoo and if Yahoo won't accept it, they (Microsoft) did the right thing in walking," said Mike Binger, a fund manager at Thrivent Financial, which owned both Yahoo and Microsoft shares.
Microsoft courted Yahoo to capitalize on the rapidly growing market for Internet advertising, one that has long been served by Yahoo's search, e-mail and Web communities.
It is also trying to fend off the expansion of Google, which has made inroads into Microsoft's home turf with a portfolio of Web based-applications, e-mail and messaging.
But now that a deal has fallen apart, Google has emerged as the key beneficiary. Shares in the company rose 2.3 per cent.