Microsoft, Yahoo! Keep Playing Chicken

"Microsoft tried to push Yahoo! harder to accept the original terms and nothing's changed," Friedland says. "So you have to question what Microsoft's next move is going to be."

Microsoft needs Yahoo!'s online traffic and search share to gain traction with advertisers in its competitive battle with Google(GOOG Quote).

One sell-side analyst, who asked not to be named, discounts the possibility that Microsoft can grow its search and advertising shares organically, since it has floundered up to now. After years of trying to drive organic growth, the Redmond, Wash., software giant is pursuing Yahoo! because it's the best means to the end, he says.

Nielsen put Microsoft's search share in March at 12%, Yahoo!'s at 18% and Google's at 59%. Since January, Microsoft's share has held steady, while Yahoo! has lost one percentage point to Google.