Microsoft, Yahoo! Keep Playing Chicken

SAN FRANCISCO -- Investors and analysts are now waiting for Microsoft(MSFT Quote) to drop the other shoe.

The company had indicated last Thursday that it would disclose early this week its next move in pursuit of a merger with Yahoo!(YHOO Quote).

Yahoo! has apparently allowed a Saturday deadline to accept or negotiate Microsoft's $31-a-share offer to pass quietly. Microsoft recently gave plenty of clues that if Yahoo! didn't accept, it would either go it alone, or announce a hostile proxy action to secure its rival for search-advertising market share.

"Microsoft is likely to back off for now," says Roger Kay, a stock analyst with Endpoint Technologies Associates. "I don't think they are going to raise the bid. If they back off and Yahoo!'s stock price tanks, Microsoft is free to come back in and offer a lower price, demonstrating that it was the bid that was keeping the price higher -- not Yahoo!'s assertion that it was because of locked future value." ...