Stay Tuned: Will Microsoft Sweeten The Deal?

The NY Post is reporting that despite public statements from Microsoft CEO Steve Ballmer and CFO Chris Liddell, the offer on the table is final and that though Microsoft might “walk away” from Yahoo, there may in fact be a new and improved offer to Jerry Yang and his fellow Yahoo board members through “back channels.”

The Post article says:

Sources said that Ballmer is more likely to reach out to Yahoo! through back channels with a slightly sweetened offer provided Yang and the board agree to begin formal deal discussions. Barring that, and absent a deal by Microsoft’s self-imposed Saturday deadline to go hostile, Ballmer will likely move forward with his plan to unseat Yahoo!’s directors.

Absent such an offer, Microsoft has a couple of choices: a proxy fight for control of Yahoo’s board or abandonment of the deal.

Yesterday afternoon Microsoft reported fiscal third quarter results. Overall revenues were a massive but mixed $14.45 billion. Online services came in at $843 million, $240 million more than the same quarter a year ago. However, the division still posted a $228 million loss. (For more analysis of earnings, see the Wall Street Journal story.)

The three week deadline set by Microsoft for Yahoo to start negotiating expires tomorrow, after which Microsoft has promised to announce what its plans will be. As I argued previously, this now amounts to a high stakes game of “chicken” for both sites.

If something happens over the weekend, we’ll try and track the news. But nothing is likely before Monday.