Microsoft has dropped its bid to buy Yahoo, after the two sides failed to agree on a sale price. The end of negotiations, which started three months ago, was announced in an official statement on Microsoft's website.

Microsoft chief executive Steve Ballmer said his company had raised its original offer up to $33 per share, after Yahoo turned down Microsoft's previous bid.

That would have valued Yahoo at $47.5bn (£24bn), up from Microsoft's previous bid of $44.6bn.

However, Balmer said Yahoo had asked for  $37 a share - putting its value at $53bn overall and forcing Microsoft to withdraw its offer.

"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo and the market as a whole," Ballmer said.

"Despite our best efforts, including raising our bid by roughly $5bn, Yahoo has not moved toward accepting our offer."

Ballmer said his company would not launch a hostile takeover to gain control of Yahoo, choosing to achieve its goals at a slower pace.

Yahoo countered Microsoft's statement by maintaining that the offer hadn't been enough.

Microsoft had pursued the deal in a bid to catch up with Google in the online advertising market.

Google consolidated its position with its previous buyout of DoubleClick, which Microsoft was in talks to buy at the time.