"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo! and the market as a whole," Ballmer said in a statement posted on the Microsoft website.
"Despite our best efforts, including raising our bid by roughly $US5 billion ($A5.37 billion), Yahoo! has not moved toward accepting our offer.
"After careful consideration, 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," said Ballmer."