• Bloomberg News, Friday, August 22, 2008 11:02 AM

Now, the Microhoo saga really has come full circle: Bloomberg News reports that Yahoo's stock on Thursday slumped to its lowest level since Microsoft launched the unsuccessful takeover seven months ago. Prior to the sell-off, Sanford C. Bernstein & Co. analyst Jeff Lindsay issued a report citing a softening display ad market. "What is different between now and when the first bid happened is the environment has gotten a lot worse," Lindsay said, adding that he expects Yahoo shares to perform in line with the market. "The immediate way forward and upwards is unclear."

Yahoo dropped 6 cents to $19.11 at 4 PM on Thursday, its second consecutive day trading below its $19.18 close on Jan. 31, the day before Microsoft's $31 per share takeover offer. Yahoo rejected that bid and then later rejected a sweetened $33 per share offer, before talks broke down completely. Bloomberg points out that buying Yahoo would have helped Microsoft triple its percentage of U.S. Internet searches, narrowing the gap with runaway leader Google.

Lindsay's bearish outlook for the display market was echoed last week by eMarketer analyst David Hallerman, who said he planned to revise his ad outlook lower by "a few percentage points."

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