After weeks for speculation and discussion on the Microsoft bid to buy Yahoo! and the resistance from Yahoo!, Microsoft has finally withdrawn its bid to buy Yahoo! and the battle of the internet giants seems to have paused for the meantime, till either gets more money….

Microsoft issued a press release announcing the withdrawal and also quote the letter written by Steven A. Ballmer (Chief Executive Officer, Microsoft Corporation) to Jerry Yang (CEO and Chief Yahoo).

“In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.”

�Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,� said Ballmer.

Yahoo! responded by issuing a statement

“From the beginning of this process, 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 joined us in expressing that view. Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making.”

Yahoo! has emerged a stronger web player after this ‘hostile bid’ and Microsoft has found a tough competitor in its own game. Lets see who wins finally, and the battle is far from over….

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