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Just yesterday Microsoft (Nasdaq:MSFT) decided it was no longer worth it to pursue Yahoo (Nasdaq:YHOO). The software tech giant pulled its $42.3 billion bid for Yahoo, and decided against raising the offer price. Yesterday there were last minute discussions between Microsoft and Yahoo regarding terms of a possible buyout, but the two sides couldn't agree on a sale price.

Later in the day on Saturday Microsoft CEO Steve Ballmer sent Yahoo co-founder Jerry Yang a letter saying "clearly a deal is not meant to be." Also inside Ballmer's letter he made it clear that Microsoft had been willing to pay as much as $33 per share for Yahoo, a significant amount higher than its original bid of $29.40 per share. According to Ballmer, Yahoo's board demanded at least $37 per share for Yahoo, which in Microsoft's view was too steep of a price to pay for the struggling internet company.

Yahoo Chairman Roy Bostock said on Saturday that from the beginning of the whole buyout talks Microsoft has undervalued Yahoo and its assets. He said that Yahoo will continue to try to turn things around and maximize shareholder value.

Microsoft was pursuing Yahoo in large part because of Google's recent dominance in the quickly growing internet ad market. For now, the company will have to continue to try to chip away at Google's position on its own.

Time will tell what this means for Yahoo, but one thing is for sure, the seat is getting hotter and hotter for Jerry Yang. It seems to me that the Microsoft offer was a pretty impressive one given the pathetic performance from Yahoo in the last few years. Yahoo shares have done very poorly for three years now and shareholder's are expecting results. If results don't come before long, expect more takeover attempts to come. Next time those takeover attempts may well be hostile in nature, and Microsoft could still be a part of those talks.