Redmond, Wash. - Shares of Yahoo (NASD: YHOO) fell 15% by late Monday, two days after Microsoft (NASD: MSFT) withdrew its $47.5 billion takeover bid for the company. A deal, which had been more than three months in the making, appeared to be close to fruition last week, when Microsoft agreed to raise its offer by $4 a share -- roughly $5 billion -- to $33 a share. According to Microsoft CEO Steve Ballmer, however, Yahoo CEO Jerry Yang rejected the deal, insisting the offer be raised to at least $37 a share.

"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer," said Ballmer.

"After careful consideration, we believe the economics demanded by Yahoo do not make sense for us."

In a letter to Yang, Ballmer also ruled out a proxy fight for control of Yahoo's board, saying, "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."

In response, Yang said that Yahoo's board and management remained "steadfast in our belief that Microsoft's offer undervalued the company."

Despite its drop in value, the $24.25 at which Yahoo's shares were trading at on Monday near closing is still a good deal better than the $19 they were at before Microsoft made its initial bid for the company.

Poll: Is Yahoo CEO Jerry Yang Right To Reject Microsoft's $37.5 Billion Offer?

Related Links:
http://yhoo.client.shareholder.com/press/releasedetail.cfm?ReleaseID=308131 http://www.microsoft.com/presspass/press/2008/may08/05-03letter.mspx