Microsoft Developer interview questions

it was a 1:1 on campus interview. The recruiter asked me the following question: "We have two sorted single direction linked lists. Write an efficient algorithm to merge them together and the outcome should be sorted as well. Creating a new linked list is not allowed". Then he asked whether I was graduating the following quarter to which I answered no. After two weeks received and email that said, they could not proceed with the second round of interviews and they can not tell my why!

I gave my resume to one of the recruiters who came to our college and they setup a phone interview with me. It took about 45-60 minutes and the interviewer asked me questions about linked lists, arrays and one brain teaser. After that i was scheduled for an on-site interview. I spoke with 2 managers and 2 developers from Remote Desktop group and i did 90 percent of the questions. However Microsoft was laying off people and they stopped a lot of positions before i went there. Remote Desktop department is not what i was going to see but i ended up seeing them. Finally 1.5 weeks later i got a letter saying that they cant offer anything