Yahoo shares slump on Microsoft pullout

Published on Monday 5 May 2008 21:13

SHARES in internet giant Yahoo lost about a fifth of their value yesterday as hopes for the once-dominant search engine dimmed following Microsoft's withdrawal of a $47.5 billion (£24bn) takeover bid.

Analysts believe Yahoo's share price will surrender most, perhaps all, of its 50 per cent gain since Microsoft made its initial offer at the end of January in an effort to challenge online advertising and search leader Google. The anticipated sell-off would leave Yahoo's market value hovering around $30bn.

Last-ditch talks between Yahoo and Microsoft were fruitless, leading Microsoft to walk away from a deal at the weekend.

Analysts said Yahoo must now come up with some answers about what it will do next.

Shares in Google were slightly higher in early trading in New York. Discussions between it and Yahoo could lead to a long-term advertising partnership, but any Google-Yahoo alliance would probably face competition hurdles.

A tie-up with Google, seen as a big winner from the ending of the Microsoft-Yahoo talks, should help boost Yahoo's performance in the near term.

Yahoo's shares also slumped in trading in Frankfurt.

Roland Hirschmueller, an equities trader at German brokerage Baader, said: "(Yahoo chief executive Jerry] Yang is certainly under a lot of pressure now. His days are numbered, if he doesn't manage to come with an alternative strategy."

Standard & Poor's equity analyst Scott Kessler added: "You are going to see a lot of shareholders just throwing in the towel."