Look at it this way for a minute.
Microsoft Corp. (MSFT) bids for Yahoo Inc. (YHOO); Google Inc. (GOOG) shows fear. Google is now under pressure, and should remain under pressure as long as the Microsoft deal is on the table. Google doesn't like pressure (e.g., they don't give earnings guidance). Why would Microsoft rush to "sweeten" its bid? Microsoft has Google right where it wants it, and all Microsoft had to do was send out a few memos and press releases.
Now Yahoo is scrambling for higher bidders, trying to outsource search to Google, thinking about a merger with AOL, all while deploying new initiatives to hold up what it knows is its soon-to-be declining stock value.
No matter how many articles Yahoo writes about reinventing mobile social networking, it won't hold its stock at $30 a share. I don't think such lackluster news is even worth $20 a share. At this point, Yahoo shareholders only have one thing on the brain: "Show me the money!" It's my opinion that Microsoft won't show them that money.
In its statement, Microsoft said its offer was "full and fair" (indicating it would NOT raise its bid over $31). I'll take Microsoft at its word.
Microsoft also made hints at a potential proxy fight. Based on Tuesday's Yahoo stock activity, I don't think Yahoo shareholders are ready for a fight. If Yahoo was getting ready for war, then the price of Yahoo stock should go higher as core Yahoo shareholders move to ratchet up outstanding shares in the market. That's NOT what happened Tuesday. Yahoo went sideways-south.
Microsoft is now playing the waiting game. I believe that after Yahoo Chief Executive Jerry Yang and his company board's arrogant and greedy response to Microsoft's generous offer, Yahoo shareholders will be waiting a long, long, long time for anything over $31 from Microsoft. In fact, Microsoft may lower its bid, or withdraw it entirely.
If I were Microsoft, I would wait about a month or two, as Yahoo, Google and Time Warner Inc. (TWX) stocks flail about. Then I would either lower or withdraw my bid, citing "a lack of perceived value." The aftermath of this move would be CATASTROPHIC for Yang and the Yahoo board. It would also cause internal turmoil for Yahoo shareholders and staff, as Yahoo employees who WANT the Microsoft deal are disgruntled. Basically, Microsoft lowering or withdrawing its bid spells big trouble in little Yahoo. And that's good for Microsoft.
In the end, however many ways you toss this salad, Microsoft comes out the clear winner here. Whether it gets Yahoo or not. Yahoo and Google are the clear losers, and I'm inclined to believe that's exactly what Microsoft had planned all along.
Hmm.. another side of story !