Microsoft has now dropped its three-month bidding bid to buy Yahoo because the two sides cannot agree on the price.
Steve Ballmer, the chief executive for the software giant, formally withdrew the offer to Jerry Yang, the chief executive of Yahoo, in a letter.
Microsoft is said to have raised the offer to $47.5 billion, or $33 per share, from its original offer of $44.6 billion. But Mr Ballmer has said that Yahoo was insisting that it should pay at least $53 billion, or $37 per share – more than what was Microsoft was willing to pay.
Mr Ballmer has also said that it would not pursue "plan B", which consisted launching a hostile takeover after Mr Yang would make Yahoo undesirable for Microsoft.