Microsoft seems prepared to walk away from Yahoo deal

By Ed Oswald, BetaNews

April 23, 2008, 1:47 PM

In the face of better-than-expected financial results last quarter for Yahoo, Microsoft now seems to be indicating that it is ready to move on.

Over the past two days, CEO Steve Ballmer has made comments that Microsoft's offer for Yahoo will not change, and that the company will soon move on if necessary.

The most recent comments came Wednesday at a conference in Milan, Italy where he reiterated that his company's $44 billion offer for Yahoo properly valued the company, calling it "a lot of money."

Ballmer also said that Microsoft was prepared to walk away from the deal. This builds upon comments he made in Morocco on Tuesday, when he said a better than expected quarterly report would not change the company's offer.

Indeed, Yahoo's results were quite robust: revenues were up nine percent, with profits up 11 percent. Suddenly, Microsoft's claims that Yahoo needed the Redmond company's help to continue seemed a little off base.

Now it almost seems to indicate that if Microsoft is really serious, it has no choice but to raise its offer. With a good quarter under its belt, those investors and executives who already decided that the deal undervalued the company have an even stronger basis for their claims.

Yankee Group analyst Daniel Taylor said to not forget that the company is still making quite a bit of money. "Yahoo wants to run the company they're in the process of re-building. Their goal isn't to sell out today," he said.

So what is Microsoft to do? From the looks of things, it may be thinking it would be in its best interest to just call the whole thing off.