May 27, 2008 11:20 AM
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Why didn't Microsoft CEO Steve Ballmer follow through on his threat to take his $33 per share offer for Yahoo to its shareholders? Because Microsoft chairman Bill Gates tapped the brakes, reports Kara Swisher. "Numerous sources" say Gates didn't want a Yahoo merger as a way to solve Microsoft's online problems, but figured as CEO of the company, Ballmer should have free rein.
But after Yahoo cofounders Jerry Yang and David Filo showed it would take a messy proxy fight to push a merger through at Microsoft's price, Gates lost patience and quashed the whole enterprise, reminding Ballmer that Microsoft really just wanted Yahoo's search business. Now Yang and company — under pressure from activist shareholders — crave a full merger and believe it to be a "a strategic imperative for Microsoft," according to one source who also observes: "I think sometimes that their execs must be smoking something."
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