With its three-month pursuit of Yahoo at an end, Microsoft is back where it started: far behind Google, the undisputed online-advertising leader.
For several years, Microsoft has been striving for a bigger share of the billions of advertising dollars migrating online. Buying Yahoo would have gone a long way to making that happen, the company reasoned.
Now, after the companies could not agree on a purchase price, Microsoft has to chart a different course. Chief Executive Steve Ballmer, in an e-mail to employees Saturday explaining his decision to withdraw the offer to buy Yahoo, said Microsoft has a strategy in place.
"Although the acquisition of Yahoo would have accelerated our ability to deliver on our strategy in advertising and online services, I remain confident that we can achieve our goals without Yahoo," Ballmer wrote.
But some analysts are looking for something new.
"It's not OK to say, 'We're going back to Plan A,'" said Charlie Di Bona, a securities analyst with Sanford C. Bernstein. "They need to say something that's credible and different. That's not Plan B, since they just gave up on Plan B. So what's Plan C?"
While Microsoft may be back where it started, the landscape has shifted since it offered to empty its bank accounts to buy Yahoo for as much as $47.5 billion. Microsoft's pursuit of the one-time Internet champion may have chased Yahoo into Google's arms for an online-advertising partnership.
Media giants Time Warner and News Corp. also saw their online properties, AOL and MySpace, respectively, raised in partnership and acquisition discussions.
Microsoft's main reason for buying Yahoo was, in essence, a shortcut to catch up with Google. Benjamin J. Romano, The Seattle Times, reports