MediaFile

Microsoft’s weekend deadline to Yahoo to negotiate a friendly deal has come and gone. So, now what? Microsoft has its options. It could raise its bid, walk away, go hostile at a lower price or go hostile at the current price. Most Wall Street analysts think the last option is the most likely.

Separately, Marc Andreessen , co-founder of Netscape, provides a thorough breakdown of the options for Microsoft and Yahoo. Especially interesting is the part about a potential legal fight if Yahoo’s board decides to exercise its poison pill as a defense to a tender offer by Microsoft.

(Photo: Reuters/Christian Charisius)

Things could get complicated soon in the saga of Microsoft’s quest to acquire Yahoo, since the software makers deadline for what was origianlly seen as a friendly deal — at the right price — passed this weekend without Yahoo saying “I Do.”

Now, that amicable offer could get downright hostile. Analysts say they believe Microsoft is planning to launch a hostile bid at its current price of $31 per share in cash and stock.

Three weeks ago, Microsoft said it will go hostile, or even call off its bid, if Yahoo did not agree to a deal before this past weekend. Now, Microsoft executives are poised to play their next card.

With earnings reports for Yahoo and Microsoft out of the way, all eyes are now on Saturday, Microsoft’s deadline for Yahoo to accept its $43 billion offer.

And just in case Yahoo felt Ballmer’s comments were vague, Microsoft CFO Chris Liddell repeated: “We have yet to see tangible evidence that our bid substantially undervalues the company (Yahoo) … In fact, we see the opposite.”

Will they stay or will they go?

Alley Insider’s Henry Blodget is betting there’s a 60 percent chance Microsoft walks. After reporting a mixed quarter and below-target forecast, it’s looking unlikely Microsoft will raise its bid.

Will Microsoft stay and fight or dump its bid for Yahoo altogether?

Even as it mulls its next move, the software maker is cranking up the heat on Yahoo ahead of its Saturday deadline.

The software maker has lined up a proxy slate of candidates to nominate to Yahoo’s board in the event it pursues a hostile bid according to the Wall Street Journal. The list has 10 nominees and three alternates the paper said citing a person familiar with the matter.

Nominees include former Nextel Partners CEO John Chapple, from Grey Global Group CEO Edward Meyer, Jaynie Studenmund, the former COO at Overture Services, which was later acquired by Yahoo, and former Adelphia Communications Corp. Chief Financial Officer Vanessa Wittman, said the Journal.

If you take Steve Ballmer at his word, the only way Yahoo shareholders may be able to squeeze a bit more money out of Microsoft Corp is to pray for a stellar earnings report from the software company Thursday afternoon.

The Microsoft CEO has been talking tough all week from Morocco to Milan, saying he wouldn’t raise the company’s bid for Yahoo — now valued at $43.8 billion — even after the Web pioneer’s quarterly results came in a bit better than expected.

With 50 percent of the offer consisting of Microsoft shares (the rest is cash), Yahoo’s shareholders need a solid earnings report from Ballmer … or the value of the bid could fall further with Microsoft’s share price .

Those of you who missed him in Morocco caught up with Microsoft CEO Steve Ballmer in Milan after Yahoo reported better than expected results, even though they fell short of stellar.

No surprise, he’s standing firm on the $44 billion offer and promises to stick by a threat to go directly to shareholders if Yahoo rejects the offer by the Saturday deadline.

Bloomberg also reports that Ballmer is willing to walk away from the deal. “We are prepared to go forward without a merger with Yahoo,” Ballmer says.

We weren’t expecting huge surprises during Yahoo’s earnings conference call, but CEO Jerry Yang was spectacularly vague about the Internet company’s plans vis-a-vis Microsoft or any other potential tie-ups — with Google, Time Warner’s AOL or News Corp — that Yahoo has been working on.

At the very start of the call, Yang essentially said “Don’t go there” to analysts and investors, reminding them about the purpose of the call.

“I’d like to remind you that today’s call is about our Q1 results, so please direct your questions to the quarter if possible,” Yang said.

“It’s a success! Now what?”

Yahoo may be ready to turn over its Web search advertising to Google following a successful test using Google’s service to deliver ads alongside its Web search results. But that’s only the beginning of what could be a swirl of deals. Or Not.

The way PaidContent sees it , if this alternative stands, and then, say, AOL merges with Yahoo, then the Google-Yahoo arrangement may have to pass anti-trust muster. And regulators are likely to give a thumbs up, TechCruch says, adding this rosy tidbit:

Everyone, even Yahoo, realizes that a Google search deal is a slow but certain death for the company.

What does the future hold for Yahoo? With so many media titans in the picture, it’s anyone’s guess how this merger mashup will end.

Just as it appears more likely that Yahoo’s days as an independent entity is drawing to a close, comes a possible deal that would lead to a bigger and better Yahoo.

News Corp is considering joining Microsoft in its bid, which would bring in MySpace and create a more formidable rival to Google.

Yahoo shareholder Legg Mason tells the Wall Street Journal it’s ready to back Yahoo’s effort to stay independent if Microsoft lowers its buyout offer.

In an interview, portfolio manager Bill Miller of Legg Mason, which is the second biggest Yahoo shareholder with a nearly 7 percent stake, calls Microsoft’s moves to threaten a lowered bid a “blunder.”

“If Microsoft lowers the price I’m not prepared to say that’s better than Yahoo remaining independent,” he said.