San Francisco: : Microsoft Corp walked away from its bid to buy Yahoo Inc on Saturday after the Internet company turned down its offer to raise the price by $5 billion to $47.5 billion. Microsoft’s offer was for $33 a share but Yahoo would not lower its demand below $37, Microsoft chief executive Steve Ballmer said. The software company initially bid $31 per share for Yahoo more than three months ago.

“We believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,” Ballmer said in a statement. Analysts say Yahoo has overplayed its hand and they expect the Web pioneer’s shares to fall as much as 30 per cent to $20 levels when Nasdaq trading resumes on Monday. The stock rose nearly 7 per cent to $28.67 on Friday on hopes of an agreement between Microsoft and Yahoo.

Some Wall Street analysts also have said Microsoft could pull its bid as a negotiating strategy aimed at putting pressure on Yahoo to eventually accept a future offer.

Microsoft wants to buy Yahoo to gain a stronger foothold in its battle with Google. Technology analysts say Microsoft may not really walk away from Yahoo, and Saturday’s move could parallel Oracle Corp’s strategy in winning over BEA Systems Inc. Oracle pulled its offer in October 2007, leading BEA shares to fall 6 per cent.