Microsoft Favoring Hostile Yahoo! Bid

A report says Ballmer is leaning toward taking his offer to shareholders.
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SAN FRANCISCO -

Microsoft

(MSFT) - Get Report

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.

Most Wall Street analysts believe a deal between the two companies will eventually happen, but are split on how. Some think Microsoft will sweeten its bid while others expect the software company to go hostile, which in turn will trigger a lengthy and costly battle to win the hearts and minds of shareholders.