Microsoft withdrew its proposal to acquire Yahoo, Microsoft CEO Stephen Ballmer said in a letter to Yahoo.
"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole," Ballmer said in the letter posted on the Microsoft website on Saturday.
"Despite our best efforts, including raising our bid by roughly five billion dollars, Yahoo has not moved toward accepting our offer.
"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," said Ballmer.
In the letter, addressed to Yahoo CEO Jerry Yang, Ballmer said that in conversations earlier in the week "we conveyed our willingness to raise our offer to 33 dollars per share, reflecting again our belief in this collective opportunity.
"This increase would have added approximately another five billion dollars of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 per cent compared to the price at which your stock closed on January 31.
"Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another five billion dollars or more, or at least another four dollars per share above our 33 dollars offer.
"It is clear to me," Ballmer wrote, "that it is not sensible for Microsoft to take our offer directly to your shareholders.