Microsoft balks at Yahoo asking price

Microsoft boss Steve Balmer's bid to swallow up Yahoo - a deal that would have resulted in the search engine founders David Filo and Jerry Yang selling the company for more than $47.5bn - collapsed at the weekend, but it was touch and go until the last minute.

According to sources close to the deal, 42-year-old Filo (pictured) flew from his home in San Francisco to Seattle to meet with Microsoft's negotiators at the airport. By this point, Microsoft had indicated that it was willing to raise its offer to $33 per share. (The value of the original cash-and-stock offer had slipped below $30, based on a decline in Microsoft's share price after the announcement.)

Filo said that the Yahoo board would be amenable to a price of $37 a share and then flew back to California. After he arrived home, Microsoft contacted Yahoo to say they were walking away from its offer.

So what next? It is no secret that Yang will be pleased with this turn of events, having been cool about the bid from the off, but the collapse of the offer will cause Yahoo problems, not least a highly probable plunge in its share price today.