Yahoo Stock Falls After Microsoft Deal Collapses Yahoo shares fell sharply on Monday, the first day of trading after news that Microsoft had pulled its $44 billion offer for the company. Microsoft CEO Steve Ballmer refused Yahoo's demand for a better deal.

Yahoo Stock Falls After Microsoft Deal Collapses

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

MICHELE NORRIS, host:

And I'm Michele Norris. The biggest technology merger of all time is off. And today, that news did not help Yahoo's stock price. Over the weekend, Microsoft withdrew its bid for Yahoo. In the end, a few billion dollars separated the two sides in a deal worth about $47 billion. After negotiations collapsed, Yahoo's CEO Jerry Yang wrote in a blog post no one is celebrating the outcome. We have two reports on Yahoo's fate. First, here's NPR's Wendy Kaufman from Seattle.

WENDY KAUFMAN: No one was surprised when Yahoo's stock fell sharply today to the mid-$20 range. During negotiations, Microsoft said it would pay as much as $33 a share for Yahoo, but Yahoo said it was worth even more. The question many are asking is did Jerry Yang do the right thing in passing up the Microsoft deal? Here's Wall Street analyst Mark Mahaney at Citigroup.

Mr. MARK MAHANEY (Wall Street Analyst, Citigroup): The answer to that question, it will be very clear if, within a reasonable period of time, call it nine to 12 months at the latest, his stock isn't back up above 30 based on either strategic initiatives or his own - company's own execution, it'll be fair to say he will have blown it.

KAUFMAN: Clearly, Mahaney doesn't think Yang can pull that off. In a report issued Monday, he recommended shareholders sell their Yahoo stock. Analysts at the technology research firm ThinkPanmure were even more blunt, describing rejection of the Microsoft offer as one that is likely to go down as one of the more destructive decisions for shareholder value in the history of Internet stocks. Lawyer Mark Leibovich would likely agree. He is lead counsel in class action lawsuits that were filed against Yahoo and Yang even before the deal unraveled.

Mr. MARK LEIBOVICH (Attorney): The case began two and a half months ago, where shareholders feared Jerry Yang and his loyalists would stop at nothing to avoid a deal with Microsoft. That fear has now been validated. We are going to seek to recover the billions of dollars that were lost because Jerry Yang put his own ego and self interests ahead a giving the shareholders the opportunity to sell their shares to Microsoft.

KAUFMAN: In a statement released over the weekend by Yahoo, the company said its management and independent board have been steadfast in their belief that Microsoft's offer undervalued the company. Turning now to Microsoft, the software giant went after Yahoo in an effort to compete against Google in the large and growing market for search and online advertising. But with the Yahoo deal off the table, Microsoft will have to do something else if it wants to compete in online ads. Analyst Matt Rosoff of the independent research firm Directions on Microsoft says Microsoft might take some of the money they were going to spend on Yahoo and buy other companies.

Mr. MATT ROSOFF (Directions on Microsoft): There aren't any companies I don't think that are as perfect a fit for Microsoft's online services and can fill the kinds of gaps that Yahoo could fill. But, you know, we've heard that Time Warner might be interested in spinning off AOL. Microsoft might be willing to buy parts of that.

KAUFMAN: The other name that often comes up as a potential partner is News Corp, which owns MySpace. There's one more option that just about everyone mentions: the possibility that sometime in the future, Microsoft and Yahoo will come back to the table and make a deal - perhaps something less than a full takeover. Wendy Kaufman, NPR News.

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