Microsoft Favoring Hostile Yahoo! Bid

SAN FRANCISCO - MicrosoftMSFT is reportedly leaning toward a hostile takeover of Yahoo!YHOO -- and is likely to make an announcement Friday.

Both companies have been awkwardly silent since Microsoft's deadline for Yahoo! to come to the table and negotiate a deal passed almost a week ago with no movement. But now the Wall Street Journal is reporting that Microsoft is inclined to take its case directly to Yahoo!'s shareholders.

Neither Microsoft nor Yahoo! had any comment on Friday.

Microsoft proposed an unsolicited $31-a-share bid for Yahoo! on Jan. 31, which so far Yahoo! has refused. But the Internet giant's shares were climbing Friday afternoon on the chance that Microsoft would follow through on its threat to go hostile. The stock was recently up 3.1%, or 84 cents, to $27.65. Microsoft's shares were down less than 1%, or 12 cents, to $29.28.

Sources interviewed by the the Journal allowed the possibility that Microsoft might change its strategy regarding the hostile bid before announcing a decision.

On Thursday at a meeting with employees, Chief Executive Steve Ballmer hinted that something would happen soon but gave no definitive timeline, according to media reports.

In that same meeting, Ballmer reiterated that Microsoft may walk away from a merger, although he still held out the possibilities of achieving a friendly or hostile deal.

"I know exactly what I think Yahoo! is worth, and I won't go a dime above," he is reported to have said.

Yahoo! and Microsoft met on Wednesday but appear to be no further along in the process.