Microsoft withdraws offer to buy Yahoo

Microsoft on Saturday abandoned its bid to buy Yahoo because the two sides can't agree on a sale price.

In a letter sent to Yahoo CEO Jerry Yang, Microsoft Chief Executive Steve Ballmer said the software maker was willing to pay $47.5 billion US — or $33 US per share — for Yahoo. Yahoo wanted $37 US a share.

"Despite our best efforts, including raising our bid by roughly $5 billion [US], Yahoo! has not moved toward accepting our offer," Ballmer said in a statement.

"After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal."

Microsoft's original offer was $44.6 billion US, or $31 US per share.

Yang released a statement late Saturday saying Microsoft's offer was too low and that the company was pleased so many of its shareholders agreed with its determination.

"With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history," said Yang.

The Associated Press reported late Saturday that  Yahoo is still holding talks with other potential partners.

A source familiar with the matter said Yahoo had been discussing a potential deal with Time Warner Inc.'s AOL internet division and testing a possible ad partnership to include Google Inc. search listings on its site.