Microsoft was in meetings all afternoon in Redmond, Washington and Yahoo's Sunnyvale headquarters was in high drama as they waited to see what Microsoft's next step was going to be. Microsoft did impose a deadline last week for their buyout deal, but that deadline has come and gone.
Microsoft has three options at this point. One is to increase its offer of $31 a share. At $31, the original deal was valued at close to $45 billion.
A second option would be to wage a proxy fight. Yahoo's annual shareholder meeting is scheduled for June, and Microsoft could propose a handpicked slate of directors that would smooth the way for Yahoo to agree to a deal.
The third option would be to walk away.
Analysts close to both companies compare the situation to a case of unrequited love. Microsoft is smitten by Yahoo. It needs Yahoo's stronger presence on the internet. The future of software delivery is over the internet, not distributed in boxes or on store shelves, but Yahoo isn't in love with Microsoft and would prefer to stay independent.
"Yahoo does not want a white night. They don't want to sell. They want to actually be a standalone company. They want to continue to add value. Problem is that the market is very tough and they may have some kind of partnership to pull this off," says Creative Strategies owner Tim Bajarin.
There is a lot of pressure on Steve Ballmer to get the deal done. If they do not get the deal done, they are the going to have to rely on their own online services unit, which has really struggled, so this is really his reputation on the line," says John Letzing of Marketwatch.com.
Some Yahoo shareholders want to holdout for $35 to $37 a share before they sell out, but Microsoft has shareholders too and they may not want to spend that kind of money. We will have to wait to see how the drama plays out of Redmond, Washington.
