Microsoft Corp. has announced that it had withdrawn its proposal to acquire Yahoo! company.

“We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo! and the market as a whole. Our goal in pursuing a combination with Yahoo! was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees,” said Steve Ballmer, chief executive officer of Microsoft.

The chief executive of Microsoft said he was disappointed that Yahoo! had not moved towards accepting the software giant’s offer. He indicated that he believed that a combination of the two companies would have created real value for shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace.

“Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not movedtoward 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.

“We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners. While Yahoo! would have accelerated our strategy, I am confident that we can continue to move forward toward our goals,” Ballmer said.

“We are investing heavily in new tools and Web experiences, we have dramatically improved our search performance and advertiser satisfaction, and we will continue to build our scale through organic growth and partnerships,” said Kevin Johnson, Microsoft president for platforms and services.