So Ballmer backs off and Microsoft withdraws their offer for Yahoo!. Is this saga over? Not yet. Jerry Yang will be under immense pressure to show that Yahoo! is really worth what he thinks it is ($37/share), because the market certainly disagrees. And some pundits, like The Buzz's Paul R. La Monica think Yahoo! could come crawling back to MSFT eventually.
I think Steve Ballmer played this well. Most thought he would just pay more for Yahoo! to get the deal completed. But walking away turns up the heat on Yang and Co., and will certainly make shareholders less patient (some are already huffing mad).
Ballmer may be creating an opportunity to come back with his original offer that a more wary Yahoo! will accept (in lieu of shareholder lawsuits and Wall Street disgust). With such a significant strategic objective aired in public, Microsoft better have a good plan B to right their internet ship. More likely, however, they are hoping to make this deal happen at a later time.
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