Microsoft (MSFT) And Yahoo! (YHOO) Meet

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Microsoft (MSFT) and Yahoo! (YHOO) management met this week to discuss a possible merger. Redmond made it clear that it would not raise its bid, according to The Wall Street Journal. Everyone left the room and that was the end of it.

It is astonishing that Microsoft does not abandon its bid, at least for now. Yahoo! has had several difficult quarters. If Microsoft walks away, the shares in the portal almost certainly drop from $28 to $19, where they traded a few weeks before the offer.

The move would force institutional owners of Yahoo! to pressure the board for a deal and would raise the specter of a number of lawsuits. Employees with Yahoo! stock options might see their gains erased. Suddenly the rank-and-file at the company might view the buy-out as a good idea.

Microsoft has almost nothing to lose by walking away. Nothing prevents it from coming back, and its current approach is getting it nowhere.

Douglas A. McIntyre