It took them a week to figure out a plan, but Yahoo is going to reject MSFT's offer.
Yahoo to reject MSFT
Realistically, this is the appropriate thing for them to do. When you know that your bidder has very deep pockets you owe it to your shareholders to try and get the best price possible. I doubt though, that MSFT will sweeten the deal much. Its still a good deal for YHOO shareholders.
Jerry Yang is clearly playing hard to get and trying to get an extra few bucks out of MSFT. Given that he owns over 40 million shares of YHOO, pushing the price up to $40 per share will net him a gain of over $20 since MSFT originally bid. His holdings will have increased by $800 million!