Microsoft walks away from Yahoo deal

Negotiations break down on offer price.

Microsoft on Saturday withdrew its takeover offer for Yahoo as the internet company continued to reject the terms of the proposed deal, despite a higher offer worth $33 a share, or $46.5 billion.

The apparent abandonment of the three-month takeover tussle came after Yahoo founders Jerry Yang and David Filo flew to Seattle earlier in the day for a last-ditch negotiating session with Steve Ballmer, Microsoft's chief executive officer, and Kevin Johnson, who oversees its internet operations, according to a person close to the situation.

While the Microsoft executives had raised their cash-and-stock bid from the original $31, and from the $29.39 the offer was worth at the end of last week, the Yahoo representatives on Saturday continued to hold out for at least $37 a share, according to this person.

In a letter addressed to Yang, and released publicly late in the afternoon on the West Coast, Ballmer said he was formally withdrawing the offer, though his letter included at least one hint that he might reconsider if Yahoo bows to Microsoft's terms.

"I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares," the Microsoft CEO wrote.