No deal! It’s official: after months and months of negotiations, with Microsoft saying YES, and Yahoo saying NO, it was Microsoft’s turn to say NO! Talks of a possible agreement over the weekend between the two parts emerged on Friday, together with rumors that Ballmer might also give up on the idea of a merge, but as Ballmer said in his May 3 letter to Yahoo, “our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.”

Yahoo initially rejected Microsoft’s unsolicited bid of $31 per share saying it greatly undervalued them, which got everyone wondering how much more would Microsoft be willing to bet and for how long will Yahoo be able to reject its proposal?

Well, it seems that the Saturday meeting between the two parts led to absolutely nothing, or maybe it did: Microsoft (or Ballmer) realized that “a deal is not to be.” As Ballmer pointed out in his letter to Yahoo, despite raising their offer to $33 per share, the bid has proved to be insufficient, as Yahoo demanded $4 per share above Microsoft’s latest offer, which would have added $5 billion more to the deal.

“I am disappointed that Yahoo has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace,” Ballmer wrote. “Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.”

Ballmer also commented on Yahoo’s attempts to respond to a “hostile” bid by making an arrangement with Google, saying that a Yahoo-Google agreement would make Yahoo an undesirable acquisition for Microsoft:

“Your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path,” Ballmer noted. “Instead, I hereby formally withdraw Microsoft’s proposal to acquire Yahoo.”