Yahoo! on Major Deals with Google

In a letter to Yahoo CEO Jerry Yang, Microsoft chief Steve Ballmer confirmed that Microsoft was willing to offer $33 a share, but that Yahoo was holding out for at least $37 a share, or $5 billion more than Microsoft was prepared to spend. In the letter, Ballmer announced that Microsoft withdrew its offer to acquire Yahoo.

"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," Ballmer said. "By failing to reach an agreement with us, you and your stockholders have left significant value on the table. But clearly a deal is not to be."

Still evidently, the nearer-term possibility is a partnership with Google which could increase Yahoo's revenue using Google for delivering ads next to Yahoo search results. But concerning Yahoo`s Panama system which the company plans to catch up with, this could make it harder to happen since Google's search-ad leadership could be also reinforced.

According to a reliable source, Yahoo-Google ad deal is expected to be announced this week. Under that deal, Yahoo would get AOL, sans its declining Internet access subscription business, and cash from Time Warner, and Time Warner would get a 20 percent stake in Yahoo. The latter would use the cash to buy back its own stock, a move that could increase its value. Since most observers expect Yahoo's price to drop Monday because Microsoft withdrew, Yahoo likely will face pressure to boost its share price, says CNet.