Microsoft CEO Steve Ballmer wrote a pointed but relatively restrained letter to Yahoo! CEO Jerry Yang over the weekend, as Microsoft formally withdrew its acquisition bid for the Internet company--for now anyway.

Opening and closing with thanks for Yang's and Yahoo!'s time and attention, Ballmer sounds strangely sanguine as he comes to terms with disappointment over the outcome, the consequences of a protracted proxy fight, and the regulatory and legal implications of going truly medieval on Yahoo's posterior.

The Yahoo! shareholder litmus will surely show a higher ph value. Microsoft's raised offer of $33 per share was approximately $5 billion sweeter in value overall, at a 70 percent premium compared to Yahoo's stock price three months ago. Yet, there is still pervasive belief that Yahoo stock is only worth $19--all eyes are on today's opening price.

Next moves in this extended chess game, the mastery of which may yet be Microsoft's? Is Ballmer being polite because he knows that Yahoo will capitulate sooner or later, and for a happier price somewhere in the $25 to $28 range?

And why has he not filed his antitrust review yet? Microsoft knows to wear its waders after swampy past expeditions through the anti-competitive mire--but here's another provocative POV, suggesting that Ballmer, a la Oracle's Larry Ellison, should have gone fully hostile as soon as possible in order to start the clock on antitrust regulatory clearances.

What are your thoughts on the respective strategies to date, and where do you see the deal ultimately going?

Jeff Heilman

5/5/08