Talks between Microsoft and Yahoo! broke down this weekend, and it looks like Microsoft is giving up its bid for Yahoo!.

Microsoft originally offered $29.40 per Yahoo! share, bumping Yahoo! stock up nearly 50%.  This weekend Microsoft raised its offer to $33 per share, or about $47.5 billion.

But Yahoo! CEO Jerry Yang wanted $37 per share…a price that Yahoo! hasn’t been at since early 2006.

So Microsoft walked away.

Yahoo! investors will hurt on Monday when their shares tumble to pre-acquisition prices.  More than that, Yang will have to do something with Yahoo! to prove that the $37 per share price was legit and not just ego.

The problem for Yang is there aren’t that many other options out there.  There are only a couple of companies that would be willing to buy Yahoo!, and it’s unlikely that any of them would meet the $37 per share offer.

Yahoo! could explore partnerships - but that would probably just end up throwing parts of the company around to others.  Not really a big benefit to Yahoo! and not addressing the company’s core problem of Google.

So, Yahoo! is really gonna have to perform, or Yang is gonna get bounced pretty quickly and Microsoft will be there with another offer.  I’d guess that more than anything this will delay Yahoo!’s acquisition.  They need to face things…they blew it.  Now get your cash and move on.

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